U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Rel. No. 18784 / July 15, 2004
SEC v. Martin J. Druffner, et al., Civil Action No. 03-12154-NMG (D.Mass.)
Commission Files Amended Complaint Against Former Prudential Brokers In Connection With Market Timing Trades
The Securities and Exchange Commission filed an amended complaint on July 14, 2004, against five brokers and one branch manager formerly employed by Prudential Securities, Inc.=s Boston branch office in connection with their market timing trades in dozens of mutual funds. The complaint against these defendants was originally filed on November 4, 2003.
The Commission alleges in its amended complaint that, from at least January 2001 through September 2003, former brokers Martin J. Druffner, Justin F. Ficken, Skifter Ajro, John S. Peffer, and Marc J. Bilotti defrauded more than fifty mutual fund companies and the funds= shareholders by placing thousands of market timing trades worth more than one billion dollars. According to the amended complaint, the defendant brokers knew that the mutual fund companies monitored and attempted to restrict excessive trading in their mutual funds. To evade those restrictions when placing market timing trades with the mutual funds, the brokers disguised their own identities by establishing numerous broker identification numbers and disguised their customers= identities by opening nearly two hundred customer accounts under various names for seven of their market timing customers.
According to the Commission=s amended complaint, former branch manager Robert Shannon aided and abetted the brokers= fraudulent scheme by, among other things, approving new broker identification numbers and new customer accounts for the other defendants, whom he supervised. The Commission amended its prior complaint in this action in response to a court order dismissing the complaint for insufficient specificity about the fraudulent acts committed by the defendants.
The Commission=s amended complaint alleges that Druffner, Ficken, Ajro, Peffer, and Bilotti violated Section 17(a) of the Securities Act of 1933 and violated or aided and abetted their clients= violations of Section 10(b) of the Securities Exchange Act of 1934 (AExchange Act@) and Rule 10b-5 thereunder. The complaint alleges that Shannon aided and abetted his co-defendants= violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The amended complaint seeks injunctive relief, disgorgement, penalties, and such equitable relief as the court deems appropriate.
The Commission=s investigation is continuing.
For further information, please see Litigation Release Number 18444 (November 4, 2003).