FINAL JUDGEMENT ENTERED AGAINST MARKET TIMERS

FROM:  SECURITIES AND EXCHANGE COMMISSION 
May 8, 2012
Court Enters Final Judgments Against Defendants in Market Timing Case
The Commission announced that a Massachusetts federal court entered final judgments by consent against James Tambone and Robert Hussey, defendants in a case filed by the Commission on May 19, 2006. The Commission alleged in its complaint that from 1998 through 2003, Tambone and Hussey, two senior executives at Columbia Funds Distributor, Inc., the underwriter for the Columbia complex of mutual funds, allowed certain preferred customers to engage in frequent short-term trading in certain Columbia mutual funds in contravention of the prospectuses that represented that the funds did not permit, or were otherwise hostile to, market timing or other short-term or excessive trading.

Without admitting or denying the allegations in the Commission’s complaint, Hussey consented to a final judgment entered by the Court on April 13, 2012 and Tambone consented to a final judgment entered by the Court on May 7, 2012. The final judgment ordered Hussey to pay disgorgement in the amount of $37,500, plus prejudgment interest in the amount of $20,980, and a civil penalty of $75,000, for a total amount of $133,480. The final judgment ordered Tambone to pay disgorgement in the amount of $26,687, plus prejudgment interest in the amount of $15,344.38, and a civil penalty of $75,000, for a total amount of $117,031.38.

On March 19, 2012, the parties stipulated to dismiss the claim in the complaint alleging that Tambone and Hussey aided and abetted violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The claim in the complaint alleging direct violations of Section 10(b) and Rule 10b-5 was dismissed earlier in the litigation.

FORMER PRUDENTIAL SECURITIES REPRESENTATIVE FOUND LIABLE FOR DECEPTIVE PRACTICES

The following excerpt is from the SEC website:

December 16, 2011
“The Securities and Exchange Commission announced today that on December 14, 2011, a federal jury returned a verdict in the SEC's favor on securities fraud charges against Frederick J. O'Meally of Bay Shore, New York, a former registered representative of broker-dealer Prudential Securities Inc. alleged to have used deceptive practices to evade blocks on his trading by mutual fund companies. The jury found O'Meally liable for violations of Sections 17(a)(2) and (3) of the Securities Act of 1933 (the "Securities Act"). The verdict against O'Meally followed a five-week trial in New York City, NY before the Honorable Laura Taylor Swain, United States District Court Judge for the Southern District of New York.

The Commission filed its Complaint on August 28, 2006 against four registered representatives formerly employed by Prudential Securities, Inc. The Complaint alleged that, between 2001 and 2003, certain mutual fund companies detected market timing activity by the Defendants and attempted to block the Defendants and their hedge fund customers from further trading in their funds. The Complaint further alleged that the Defendants used fraudulent and deceptive trading practices to conceal their and their customers' identities to evade these blocks. Cases against the three other defendants had been resolved previously by settlement.
The district court will hear further post-trial arguments in January 2012, and may determine the appropriate sanctions and remedies against O'Meally at a later date. In addition, the jury found that O'Meally had not violated Section 10(b) of the Exchange Act and Section 17(a)(1) of the Securities Act.
For further information about the Commission's action in SEC v. O'Meally, et al., see Litigation Release No. 21882 (March 10, 2011) [settlement with Jason N. Ginder]; Litigation Release No. 20910 (February 25, 2009) [settlement with Michael L. Silver and Brian P. Corbett]; In the Matter of Michael L. Silver, Release No. 34-59639 (March 27, 2009); In the Matter of Brian P. Corbett, Release No. 34-59640 (March 27, 2009); Exchange Act Release No. 54371 (August 28, 2006) [settlement with Prudential Equity Group, LLC, formerly known as Prudential Securities, Inc.]; Litigation Release No. 19813 (August 26, 2006) [complaint against O'Meally, et al. filed].”