U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20844 / January 6, 2009
Securities and Exchange Commission v. Martin J. Druffner, et. al., United States District Court for the District of Massachusetts Civil Action No. 03-12154-NMG
FIRST CIRCUIT COURT OF APPEALS AFFIRMS SUMMARY JUDGMENT AGAINST FORMER PRUDENTIAL REGISTERED REPRESENTATIVE IN CONNECTION WITH DECEPTIVE MARKET TIMING PRACTICES
The Commission today announced that, on December 15, 2008, the U.S. Court of Appeals for the First Circuit issued a mandate relating to its October 20, 2008 decision affirming summary judgment obtained by the Commission against Justin F. Ficken of Boston, Massachusetts, a defendant in a civil injunctive action filed by the Commission on November 4, 2003. The Commission alleged that Ficken, a former registered representative of broker-dealer Prudential Securities, Inc., committed fraud in connection with his deceptive market timing trades in dozens of mutual funds. The final judgment enjoined Ficken from future violations of the federal securities laws and ordered him to pay $589,854 in disgorgement and pre-judgment interest. The First Circuit's decision affirms this judgment.
The Commission filed its complaint against Ficken, four other former Prudential Securities registered representatives, and their former branch manager, on November 4, 2003, and amended its complaint on July 14, 2004. The amended complaint alleged that Ficken was part of a three-person group of registered representatives, known as the "Druffner Group," that defrauded mutual fund companies and the funds' shareholders by placing thousands of market timing trades worth more than $1 billion for five hedge fund customers from at least January 2001 through September 2003. According to the amended complaint, Ficken knew that the mutual fund companies monitored and attempted to restrict excessive trading in their mutual funds. The amended complaint alleged that, to evade those restrictions when placing market timing trades, Druffner Group members disguised their own identities by establishing multiple broker identification numbers and disguised their customers' identities by opening numerous customer accounts for what were, in reality, only a handful of customers.
The final judgment affirmed by the First Circuit enjoins Ficken from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and orders him to pay disgorgement of $494,975, representing profits gained as a result of the conduct alleged in the amended complaint, together with prejudgment interest thereon in the amount of $94,879.
For further information, please see: Litigation Release Numbers 20722 (September 17, 2008), 20284 (September 14, 2007), 18784 (July 15, 2004) and 18444 (November 4, 2003). See also Exchange Act Release No. 54371 (August 28, 2006) [settled Order against Prudential Equity Group, LLC, formerly known as Prudential Securities, Inc., concerning deceptive market timing by its registered representatives]