Fund Probes Take New Directions
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Monday, November 10, 2003

Fund Probes Take New Directions

The fund scandals took a number of new, if less high profile, turns over the past weekend. The most prominent new development was the acknowledgment by MetLife in an SEC filing for investors that it has been contacted by unnamed regulators seeking records on market timing and late trading of mutual funds and variable insurance products. Meanwhile, Merrill Lynch fined two brokerage executives for making improper fund trades and a regional broker-dealer revealed that it too is under investigation.

The news from MetLife comes as variable annuities are coming under more scrutiny as a possible vehicle for market timers. MetLife did not reveal in the filing further details of the information requests and it is not determinable whether the insurer is the target of a probe. The insurer said it is cooperating with the information requests.

Merrill Lynch fined Curtis Brown, regional director in San Francisco, and Andy Williams, regional director mid-Atlantic region up to $250,000 for failing to supervise brokers, reported the New York Post. Williams was responsible for some of the most profitable locations for Merrill, including New York City, New Jersey, Long Island and Westchester.

The pair was disciplined for recruiting and supervising three brokers recruited from UBS Paine Webber in 2001 for Merrill's Paramus, New Jersey office who let Millennium Partners market time funds. The three were fired last month. At the time of the broker's hiring Brown was the head of the Paramus branch and Williams was the regional manager responsible for that office, according to the paper.

Both Brown and Williams are still employed by Merrill Lynch. A Merrill spokesperson told the paper that the reported amount of the fine was "inaccurate" and "inflated".

Also on Friday Empire Financial Holding Co., a brokerage services company, disclosed in an SEC filing that it uncovered instances in which its employees entered orders after the 4 PM market close and that it has received subpoenas from regulators seeking information about improper mutual fund trades. The Longwood, Florida-based firm said that four employees also received subpoenas from the SEC that sought information and documents.

Empire Financial said that it is cooperating with the investigations.

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