Trautman Wasserman & Company, Inc., Gregory O. Trautman, Samuel M. Wasserman, Mark Barbera, James A. Wilson, Jr., Jerome Snyder, and Forde H. Prigot Brenda P. Murray, Chief Administrative Law Judge
CORRECTED
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20161 / June 20, 2007
SEC v. Scott A. Christian, Civ. No. 05-cv-06239 (LTS) (USDC SDNY).
Court Enters Final Judgment Against Former Broker For Role In Mutual Fund Market Timing And Late Trading
The Securities and Exchange Commission announced today that the United States District Court for the Southern District of New York ("SDNY") entered a Final Judgment on June 19, 2007, in a settled action against Scott A. Christian, a former registered representative at Trautman Wasserman & Company, Inc. ("TWCO"). Christian, without admitting or denying the Commission's allegations, consented to the entry of the judgment that enjoins him from violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5 thereunder, and from aiding and abetting violations of Sections 15(c) and 17(a) of the Exchange Act and Rules 10b-3 and 17a-3. The final judgment also directs Christian to pay $250,000 of disgorgement.
According to the SEC's Complaint filed in the SDNY in July 2005, Christian, a resident of New York, NY, engaged in late trading on behalf of Trautman Wasserman customers. See Litigation Release 19294 (July 7, 2005). Christian carried out the late trading scheme by having customers submit proposed mutual fund trading orders during the trading day and time-stamping them just before 4:00 p.m. to make it appear that customer orders were received before 4:00 p.m. Christian did not, however, enter these proposed trades for execution. Instead, Christian communicated with customers well after 4:00 p.m. (often until 6:30 p.m. or later) to determine if the customers wanted to execute the proposed orders or submit different orders based on post-4:00 p.m. market information. After customers made their final post-4:00 p.m. trading decisions, Christian entered the customers' orders into the trading system at the price based on the net asset value determined as of 4:00 p.m. Additionally, Christian created false records to conceal the late trading.
Christian and Trautman Wasserman received 307 letters from 40 fund companies seeking to stop excessive trading by accounts at Trautman Wasserman. Knowing that mutual fund companies monitored market-timing activity by account number and registered representative identification number, Christian opened and traded in multiple accounts for his market-timing customers and utilized numerous different registered representative identification numbers, to evade mutual fund companies' restrictions on frequent trading.
In addition, in July 2005 the Commission issued an order pursuant to Section 15(b) of the Exchange Act barring Christian from association with any broker or dealer based upon Christian's guilty plea to a criminal charge in New York state court. See Exchange Act Release No. 52163 (July 29, 2005).
In a related matter, in February 2007, the Commission instituted administrative proceedings against TWCO, Gregory O. Trautman, Samuel M. Wasserman, James A. Wilson, Jr., Mark Barbera, Jerome Snyder, and Forde H. Prigot, alleging violations of the federal securities laws in connection with market timing and late trading. The administrative proceeding, In the Matter of Trautman Wasserman & Co., Inc. et al., File No. 3-12559, is pending.