U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19856 / October 2, 2006
SEC v. Martin J. Druffner, et. al., United States District Court for the District of Massachusetts Civil Action No. 03-12154-NMG)
Commission Settles Charges Against Former Prudential Branch Manager in Connection With His Aiding and Abetting Securities Fraud
The Commission announced today that, on September 22, 2006, a Massachusetts federal court entered a final judgment by consent against Robert E. Shannon of Annapolis, Maryland, a defendant in a civil injunctive action filed by the Commission on November 4, 2003. The Commission alleged that Shannon, a former branch manager of broker-dealer Prudential Securities, Inc., aided and abetted others' securities fraud in connection with their market timing trades in dozens of mutual funds. The final judgment enjoined Shannon from future violations of the antifraud provisions of the Securities Exchange Act of 1934 and ordered him to pay a $60,000 civil monetary penalty.
The Commission filed its complaint against Shannon and five former Prudential Securities registered representatives on November 4, 2003, and amended its complaint on July 14, 2004. The amended complaint alleged that several registered representatives supervised by Shannon defrauded mutual funds that were trying to restrict their trading by disguising their and their customers' identities through the use of multiple broker identification numbers and customer accounts. The amended complaint alleged that Shannon substantially assisted the registered representatives in evading the mutual funds' restrictions on the registered representatives' market timing of those mutual funds by, among other things, approving new broker identification numbers and new customer accounts for the registered representatives.
Without admitting or denying the allegations in the Commission=s amended complaint, Shannon consented to the judgment entered by the U.S. District Court for the District of Massachusetts, which permanently enjoins him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment also orders Shannon to pay a $60,000 civil monetary penalty. In addition, on July 12, 2006, as a result of a guilty plea in a case prosecuted by the United States Attorney's Office in Boston, Massachusetts, concerning the same conduct that formed the basis of the Commission's civil injunctive action against him, an administrative law judge issued an order, based on the plea, barring Shannon from association with any broker, dealer, or investment adviser.
For further information, please see: Litigation Release Numbers 19723 (June 9, 2006)(Shannon's guilty plea); 18784 (July 14, 2004) (amended complaint filed against Shannon and others) and 18444 (November 4, 2003) (initial complaint filed against Shannon and others); and Exchange Act Release No. 54132 (July 12, 2006)(Order barring Shannon from associating with any broker, dealer, or investment adviser).