Three years after the SEC charged five Boston-based Prudential Securities brokers for abusive mutual fund trading, one of the accused is being temporarily barred from association with any broker/dealer or investment advisor.
On Dec. 8, John Peffer settled with the SEC in a Federal District Court. Today the SEC ordered that Peffer be barred from employment in the securities industry for three years, after which time he may reapply. He was also ordered to pay a $50,000 fine. Peffer is the first to face any punishment for the charges brought against the group in November 2003.
Two other Boston-based brokers, Martin Druffner and Skifter Ajro, pleaded guilty to criminal charges two months ago, according to John Dugan, Assistant District Administrator of the SEC Boston district office. “The SEC is also seeking to bar Druffner and Ajro today, along with Peffer.”
The brokers were charged with market timing, or short-term buying and selling of mutual fund shares as a response to market indicators. The practice is not illegal, but many funds do not tolerate the practice and say so in their prospectuses. The complaint filed by the SEC also noted that the brokers committed fraud by using multiple broker identification and customer account numbers between January 2001 through June 2003 to hide their identities in order to market time in funds that had earlier banned their trading privileges.
The two remaining brokers in the Boston office, Marc Bilotti and Justin Ficken, are still in litigation, Dugan says. “We still have civil injunctions against all of them, and we hope to have them pay back the money as well as bar them,” he says. The commission has charged that the brokers placed thousands of market-timed trades worth over $1 billion.