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Rating:First Circuit Reconsiders a Market Timing Defeat for Two Columbia Alums Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, July 24, 2009

First Circuit Reconsiders a Market Timing Defeat for Two Columbia Alums

News summary by MFWire's editors

Robert Hussey and James Tambone will have another opportunity this fall to overturn their defeat in the SEC's suit against them. On Wednesday the U.S. First Circuit Court of Appeals in Boston agreed, by a vote of three to two, to rehear SEC v. Tambone, in which the regulatory agency attacked the two former Columbia Management executives for allegedly distributing documents containing Columbia's anti-market-timing practices and policies while permitting actual market timing in the Columbia Funds.

Part of the dispute hinges on the issue that the SEC alleged only that Hussey and Tambone used and distributed the allegedly misleading disclosures, not that they themselves created them.

The SEC first filed suit in February 2005 against Tambone, who had served as co-president of Columbia Distributor, and Hussey, who had served as senior vice president and managing director for national accounts. The U.S. District Court for Massachusetts dismissed the case in January 2006. The SEC returned to court again in May 2006, yet by December the district had tossed the case out again, leading the regulatory agency to appeal to the First Circuit.

In December 2008, a three-judge panel of the First Circuit ruled against Hussey and Tambone, overruling the district court and sending the case back to that same court.

"To make their sales, they used prospectuses which they knew, or were reckless in not knowing, contained representations about market timing practices which were allegedly false," the panel wrote. "Tambone and Hussey, executives of a mutual fund's primary underwriter, had a legal duty to confirm the accuracy and completeness of the fund prospectuses that they used in the sale of the mutual fund's securities."

After that, both Hussey and Tambone asked the full First Circuit to rehear the case, a plea the appellate court has now granted. The court scheduled the new hearing for October 6. 

Edited by: Neil Anderson, Managing Editor


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