U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20539 / April 24, 2008
Securities and Exchange Commission v. Marc J. Gabelli and Bruce Alpert, Civil Action No. 08 CV 3868
SEC Sues Gabelli Funds LLC Former Portfolio Manager Marc Gabelli and Chief Operating Officer Bruce Alpert for Securities Fraud in Connection With an Undisclosed Market Timing Arrangement; Gabelli Funds LLC Agrees to Pay $16 Million to Settle SEC Charges in Related Administrative Proceeding
On April 24, 2008, the Securities and Exchange Commission filed a civil fraud action in the United States District Court for the Southern District of New York against Marc J. Gabelli, the former portfolio manager of the Gabelli Global Growth Fund (GGGF), currently known as GAMCO Global Growth Fund, and Bruce Alpert, Chief Operating Officer of GGGF's adviser, Gabelli Funds LLC (Gabelli Funds), in connection with an undisclosed market timing arrangement with Folkes Asset Management, currently known as Headstart Advisers Ltd. (Headstart). "Market timing" refers to the practice of short term buying, selling, and exchanging of mutual fund shares in order to exploit inefficiencies in mutual fund pricing.
The Commission's Complaint, which seeks an injunction, civil penalties, disgorgement, and other relief, alleges as follows:
The Complaint charges Marc Gabelli and Alpert with fraud for aiding and abetting violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. It charges Alpert with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5.
In a related administrative proceeding, the Commission simultaneously instituted and settled administrative and cease-and-desist proceedings against Gabelli Funds, a registered investment adviser. Without admitting or denying the Commission's findings, Gabelli Funds consented to the issuance of a Commission Order finding that Gabelli Funds willfully violated Section 206(2) of the Investment Advisers Act, Section 17(d) of the Investment Company Act and Investment Company Act Rule 17d-1, and willfully aided and abetted and caused violations by GGGF of Section 12(d)(1)(B)(i) of the Investment Company Act in connection with the undisclosed market timing by Headstart. Gabelli Funds was censured, ordered to cease and desist its securities law violations, and ordered to pay $9.7 million in disgorgement, $1.3 million in prejudgment interest, and a penalty of $5 million, for a total payment of $16 million. As described in the Order, Gabelli Funds' payment will be distributed to shareholders harmed by the market timing activity during the relevant period.