Number 19 for Spitzer:
Waddell & Reed Financial recently went down on the books as the 19th firm to settle with New York Attorney General Eliot Spitzer for alleged mutual fund shenanigans. The AG first investigated New Jersey-based Canary Partners for mutual fund improprieties in 2003, eventually settling with the firm for $40 million. Waddell, one of the oldest mutual fund firms in the country, agreed to pay $50 million to settle Spitzer's investigation into improper market-timing within its own mutual funds. The company also agreed to adopt management reforms and reduce fees by $25 million over five years. “The evidence in this case showed that the company didn't just look the other way…they facilitated the transactions with full knowledge that small investors were being harmed,” said Spitzer. The firm neither admitted nor denied any of the charges.
Oppenheimer Broker Fingered:
William Galvin, the Secretary of the Commonwealth for the state of Massachusetts, filed an administrative complaint seeking a censure and a fine for New York-based brokerage firm Oppenheimer for alleged abuses committed by one of its brokers. Galvin's complaint alleges that Stephen Toussaint, an Oppenheimer broker, defrauded an elderly woman out of roughly $1.5 million through excessive and unnecessary trading in her accounts. Oppenheimer denies the allegation.
According to the complaint, in 2003, Doris Pitera, 76, and her husband William, had $2.9 million in an Oppenheimer account. Despite instructions not to actively trade in the account, the complaint alleges Toussaint made 122 trades by the end of 2003, totaling $410,111 in commissions — representing 85 percent of his total commissions for the year. He allegedly did it again in 2004, this time churning the accounts for a total of $408,816. Further, the complaint alleges Toussaint forged 19 checks from the Piteras' account and deposited more than $350,000 of their money into his own personal account. Galvin's office says Toussaint was never disciplined by Oppenheimer and was permitted to resign in February 2005. The case has also been referred to the FBI and the U.S. Attorney's Office.
A.G. Edwards Dinged by NYSE:
The New York Stock Exchange fined A.G. Edwards $900,000 for excessive fees and lack of supervision. Particularly egregious were the actions of Augusta, Ga.-based branch manager William Floyd Gibbs, who received 144 customer complaints while employed at the firm between 1996 and 2001, costing the firm $30 million in settlement costs. The firm neither admitted nor denied the allegations.