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Monday, August 28, 2006|
Pru Reportedly Near $600 Million Settlement
Once again the Wall Street Journal is reporting a scoop on a potential settlement between a firm involved in the mutual fund trading scandals and state and federal regulators. This time the settlement will be made by Prudential Financial, according to the paper. The insurer's deal may be the largest to date and is expected to be announced later Monday.
The settlement will reportedly involve a wide slate of regulators, including the Department of Justice, the SEC, the NASD and the NYSE, as well as state officials in New York, New Jersey and Massachusetts. The paper stated that a Prudential spokesperson declined to comment on the matter.
However, there has been much speculation that sources inside Eliot Spitzer's office have routinely tipped off the paper to settlements before providing information to other reporters and before making the settlements public.
The Prudential case will involve the settlement of allegations that it allowed brokers to make market-timing trades in mutual funds through its securities arm. The firm would be the first major broker-dealer, or wirehouse, to settle allegations that its brokers timed third-party funds.
It has reportedly agreed to pay some $600 million in fines and restitution to avoid criminal prosecution in the matter.
Prudential was tied to the scandals in 2003 when Massachusetts' Secretary of State William Galvin's office filed civil charges against five former Prudential Securities brokers in one of the brokerage firm's Boston office. The branch manager was also charged in the civil matter. That complaint alleged that the brokers allowed their investors to make more than $1.3 billion of market-timing trades in mutual funds from more than 50 fund families.
The reps allegedly altered their clients account information and other identifying information in order to hide the trades from the fund firms even after the fund firms attempted to stop the brokers' trades.
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