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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (301559)	2/7/2005 6:45:35 AM
From: j-at-home	Respond to of 436258

money.cnn.com A.G. Edwards charged with $2B fraud A securities regulator charged the brokerage company with defrauding mutual fund shareholders. February 2, 2005: 7:31 PM EST BOSTON (Reuters) - Massachusetts' top securities regulator Wednesday charged brokerage company A.G. Edwards with fraud for having allegedly helped hedge funds conduct $2.13 billion in improper rapid trades at mutual funds. Secretary of the Commonwealth William Galvin said the St. Louis, Missouri-based investment bank and brokerage firm defrauded mutual fund shareholders by letting a Boston-based employee execute thousands of improper trades even as mutual fund companies complained bitterly about the practice. Galvin, who has probed some of the biggest market timing cases since the practice was first uncovered in 2003, said this case stands out because A.G. Edwards tried to protect itself by getting clients who were breaking the rules to sign statements that they would not hold the company liable for damages. "It is like agreeing to put on a blindfold before someone robs the bank so that you can't see them," Galvin told Reuters in an interview. A.G. Edwards said that it plans to defend itself and added: "It's important to note that this complaint states the alleged activities occurred over a year ago and involved one branch, two clients and a financial consultant who was terminated by the firm in October 2003." Federal and state investigators have been probing A.G. Edwards for over one year. A Securities and Exchange Commission spokesman declined to comment on whether the federal government may file charges as well. The company's share price fell 1.4 percent on Wednesday and ended trading on the New York Stock Exchange at $42.17. Galvin's suit charges that Charles Sacco, a representative in A.G. Edwards' Back Bay office executed 31,000 mutual fund timing trades for hedge funds Atlantique Capital Fund and Headstart Asset Management between January, 2001 and October, 2003. A.G. Edwards, like many other companies, had rules that prohibited market timing because the practice can hurt long-term investors by watering down fund performance. But the suit alleges A.G. Edwards made exceptions for special clients and ignored pleas from mutual fund companies like Boston-based State Street Research to end the practice of market timing. Even as mutual fund companies detected what A.G. Edwards' clients were doing and tried to stop it, Sacco moved money between accounts to ones that had not been caught. The suit says that Sacco's market timing practice was so busy that he was offered an intern to help him process those trades. Galvin said the A.G. Edwards case is noteworthy because the company put so much in writing. It sent one memo in April, 2003 saying the company does not want to "attract or assist" market timing accounts. But the practice continued in Boston until October, 2003. Galvin said it was impossible to say how much A.G. Edwards may have to pay in damages. But because he has so many memos and documents showing that they treated customers differently, he said he may try to force the company to say it is guilty of the charges. Traditionally mutual fund companies have settled charges with state and federal regulators without admitting or denying guilt, winning protection against angry shareholders who might use such an admission of guilt in class action suits. Perhaps most important, Galvin, a Democrat, said these suits show that it may be dangerous for the federal government to privatize social security and force all citizens to invest their retirement money in the market. "President Bush is likely going to suggest that the whole country move to a giant 401(K) plan and I think these cases serve as a warning that there is inadequate protection," he said. [shut em down and jail em] might be easier just to declare the Hamptons a war crime zone and hit it with a tactical nuke