Administration January 8, 2002

SEC Settles First-Ever Portfolio Pumping Case

August 13, 2001 (PLANSPONSOR.com) -The Securities and Exchange Commission (SEC) brought and settled its first-ever case of "portfolio pumping" on Friday, censuring and assessing fines of $200,000 each against ABN Amro and investment manager Oechsle International Advisors for their failure to supervise now-former employees.
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ABN Amro didn’t admit or deny the SEC’s allegations, which arose from an alleged failure to reasonably supervise Angelo Iannone, its former head of international equities sales in New York.

A similar settlement was reached with Boston-based institutional investment management firm Oechsle International Advisors, for failing to reasonably supervise Andrew Parlin, a former principal and portfolio manager.

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Stocking Up

According to the SEC, Parlin purchased large numbers of shares in five European stocks held by the investment advisor’s clients through ABN Amro’s Iannone. The trades were made shortly before the close of the markets on the last trading days of the second and third quarters of 1998, according to the SEC. The late purchases were intended to boost the price of those stocks, pumping up the value of their clients’ portfolios.

In 1999 the London Stock Exchange fined ABN Amro Equities £250,000 and Morgan Stanley Securities £100,000 for “misconduct” after the scheme was uncovered there, according to the Financial Times.

“High” Five

The stocks involved were:

  • British Biotech PLC
  • Volkswagen
  • Renault
  • Banca di Roma SpA
  • Pohang Iron and Steel (ADRs)

In some cases, their efforts to push a stock’s price higher didn’t work.

After “Math”

ABN AMRO fired Iannone, while Parlin was forced out of Oechsle, according to the SEC. Both agreed to settle SEC fraud charges without admitting or denying the allegations and to pay a $75,000 fine. Both agreed as part of their settlement to a ban from their respective industries for a year.

Last year RT Capital Management, the investment arm of Royal Bank of Canada, settled a portfolio-pumping suit filed by the Ontario Securities Commission (see Settlement Deadline Nears for Pension Fund Manager RT Capital ).

– Nevin Adams                                   editors@plansponsor.com

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