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August 28, 2006 at 01:53 PM
A broker-dealer partly controlled by Prudential Financial Inc. has agreed to pay $600 million to resolve a market-timing investigation.
The U.S. Securities and Exchange Commission says it has accepted a settlement offer from the broker-dealer, Prudential Equity Group L.L.C., which was formerly known as Prudential Securities Inc.
Prudential, Newark, N.J., sold control over Prudential Securities to Wachovia Corp., Charlotte, N.C., in 2003. Prudential now owns a 38% interest in Prudential Equity, according to the SEC order that outlines the terms of the settlement.
Prudential Equity is not “admitting or denying the findings” in the order, “except as to the [SEC]‘s jurisdiction over it and the subject matter of these proceedings,” according to the order.
But Prudential Equity has entered into a deferred prosecution agreement with the U.S. Department of Justice in which the company “has admitted to criminal wrongdoing,” according to the Justice Department.
Under the agreement with the SEC, Prudential Equity will be censured and must pay a $300 million criminal penalty to the U.S. Treasury.
The broker-dealer also will pay $270 million to a fund that will compensate parties affected by the alleged market timing, $25 million to a federal fund that fights consumer fraud, and $5 million in civil penalties to the Massachusetts Securities Division, according to the order.
Other provisions call for Prudential Equity to hire an independent distribution consultant to oversee distribution of the $270 million “disgorgement” fund and for the company to cooperate with the SEC “in any litigation, ongoing investigation, or other proceedings relating to or arising from the matters described in the this order.”
Prudential Equity has agreed to produce documents at the request of the SEC and to try to make employees available for interviews by members of the SEC staff.
In addition to the SEC, parties involved in the settlement include the U.S. Department of Justice, the National Association of Securities Dealers Inc., the New Jersey Bureau of Securities, the New York attorney general’s office and the New York Stock Exchange.
The Justice Department says it has negotiated a separate compliance agreement with Prudential Equity’s former corporate parent, Prudential.
Under the terms of the Justice Department agreement, Prudential will cooperate with the department’s investigation of the matter and have its general counsel report regularly to the U.S. attorney in Massachusetts about the effectiveness of company compliance programs.
