The SEC had charged that A.G. Edwards failed reasonably to supervise some of its registered representatives who used deceptive means to place market timing trades on behalf of their customers. As part of its settlement with the SEC, A.G. Edwards will pay disgorgement and prejudgment interest of $2.36 million and civil penalties of $1.5 million for a total payment of $3.86 million.
The SEC also announced the institution of settled enforcement proceedings against a former registered representative in A.G. Edwards’ Boston Back Bay, Massachusetts, branch office for engaging in a fraudulent market timing scheme and the institution of administrative and cease-and-desist proceedings against a registered representative in A.G. Edwards’ Boca Raton, Florida, branch office and two branch managers for their alleged involvement in the fraudulent market timing schemes.
The SEC’s Order relating to A.G. Edwards finds that between January 2001 and September 2003, registered representatives in several of A.G. Edwards’ branch offices engaged in illegal market timing schemes on behalf of their customers. According to a press release from the SEC, these registered representatives engaged in deceptive practices designed to circumvent restrictions that mutual funds imposed on market timing. A.G. Edwards failed to develop or adopt reasonable policies, procedures or systems to monitor market timing in order to prevent and detect its registered representatives’ misconduct. A.G. Edwards also failed to develop or adopt reasonable policies, procedures or systems for monitoring and responding to red flags about its registered representatives’ deceptive market timing on behalf of customers.
In addition to the $3.86 million payment, A.G. Edwards has agreed to be censured and to hire an independent consultant to review its policies and procedures related to market timing. A.G. Edwards has consented to the issuance of the SEC’s Order without admitting or denying the findings contained therein.