U. S. Securities and Exchange Commission
Litigation Release No. 20722 / September 17, 2008
United States of America v. Justin Ficken (United States District Court for the District of Massachusetts Criminal No. 1:07-CR-10427-PBS)
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)
FORMER PRUDENTIAL SECURITIES REGISTERED REPRESENTATIVE PLEADS GUILTY TO CRIMINAL CHARGES IN CONNECTION WITH DECEPTIVE MARKET TIMING PRACTICES
The Securities and Exchange Commission ("Commission"), announced today that on September 15, 2008, Justin F. Ficken, age 33, of Boston, Massachusetts, pled guilty to one count of conspiracy, three counts of wire fraud, and two counts of securities fraud in a case being prosecuted by the United States Attorney's Office in Boston, Massachusetts. These charges resulted from Ficken's role in a scheme to place deceptive market timing trades in mutual funds while working at the Boston branch office of Prudential Securities, Inc. Ficken was indicted on December 19, 2007. The indictment charged that Ficken and others at Prudential Securities disguised their own and their hedge fund customers' identities in order to execute market timing trades that mutual funds were trying to prohibit. He is currently scheduled to be sentenced before U.S. District Judge Patti B. Saris on December 10, 2008.
The Commission previously filed a civil injunctive action against Ficken and others based on similar conduct. 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.
On September 13, 2007, the U.S. District Court for the District of Massachusetts entered a final judgment against Ficken after having previously granted the Commission's motion for summary judgment against him. 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. Ficken has appealed that judgment, and that appeal is pending.
On September 26, 2007, the Commission instituted administrative proceedings against Ficken based on the entry of the final judgment in the civil injunctive action to determine what, if any, remedial action was appropriate and in the public interest. On February 20, 2008, Administrative Law Judge Robert G Mahony issued an initial decision granting the Enforcement Division's motion for summary disposition and barring Ficken from association with any broker or dealer or investment advisor. Ficken has appealed that initial decision to the Commission, and that appeal is pending.
For further information, please see: Litigation Release Nos. 20413 (December 21, 2007), 20284 (September 14, 2007), 18784 (July 14, 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], Exchange Act Release No. 56531 (September 26, 2007), Initial Decision Rel. No. 345 (February 20, 2008).