Judge Tosses Prudential Broker Trading Suit

June 15, 2004 (PLANSPONSOR.com) - A federal judge dismissed a suit brought by regulators alleging six former brokers and a branch manager at Prudential Securities Inc.'s Boston office were involved in improper trading, but the government later vowed the matter was far from over.

U.S. District Judge Reginald Lindsay said the Securities and Exchange Commission’s (SEC) complaint failed to specific enough in its allegations as he dismissed the case.  

However, the judge gave the Commission 30 days to refile charges, according to news sources. A federal regulator Tuesday afternoon vowed to do just that. “We fully intend to file an amended complaint,” said David Bergers, the assistant district administrator of the Boston SEC’s office, told Reuters.

In the original suit, the SEC alleges the former brokers – Martin Druffner, Justin Ficken, Skifter Ajro, John Peffer and Marc Bilotti and former branch manager Robert Shannon – violated federal securities law when the former brokers took a variety of steps, including using false identities, to disguise market timing to enrich themselves and the hedge funds whose money they were investing.   Additionally, the Commission says Shannon “substantially assisted” the brokers by, among other things, approving market timing trades.

The SEC is seeking injunctive relief, penalties and disgorgement.

Brad Bailey, an attorney for former broker Justin Ficken, told Reuters that the SEC’s complaint was “deficient because it lacked sufficient particularization in alleging fraud.” He added that Lindsay’s decision was “a nice first phase that is really putting the SEC’s foot to the fire, but we have no illusion that we’re not going to be in this for the long haul.”

Prudential was not named as a defendant in the SEC’s action.   However, in a separate action Massachusetts Secretary of State William Galvin charged Prudential Securities last December with widespread late trading of mutual funds by ignoring the former brokers.   Galvin’s suit alleged the group carried out more than 1,100 late-trading transactions in the past 2 1/2 years with a total value of more than $162 million (See   Prudential Securities Charged with Late Trading).