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Massachusetts Regulators Charge Prudential Securities With Fraud

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Dec 12, 2003 — The Commonwealth of Massachusetts charged the former Prudential Securities Inc. with fraud, including multiple acts of market timing and late trading which enriched themselves and certain offshore hedge fund clients at the expense of individual shareholders.

Filed Thursday by Massachusetts Securities Division of the Office of the Secretary of the Commonwealth, the complaint alleges, among other things, that Prudential Securities failed to supervise the activities of its Boston branch and “knowingly furthered a fraudulent scheme perpetrated” by certain of its Boston employees.

The Commonwealth alleged that between January 2001 and August 2003, Prudential Securities’ fund exchange desk allowed at least 1,212 improper trades valued at more than $162 million.

Overall, Prudential Securities’ fraudulent trading conduct occurred between January 1998 and the present, the filing charges.

In the complaint, regulators are seeking to order Prudential Securities to “fairly compensate mutual fund shareholders for losses attributable to the… market timing and late trading” and to “pay an administrative fine.”

In July of 2003, Prudential Securities merged into Wachovia Securities LLC in connection with the combination of the retail brokerage businesses of Wachovia Corp. (WB) and Prudential Financial Inc. (PRU). The resulting entity is 62%-owned by Wachovia Corp. and 38%-owned by Prudential Financial.

In early November, regulators filed civil charges against former brokers and branch managers at Prudential Securities’ Boston office for alleged trading abuses.


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