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22 April – LAWFUEL – The Law News Network – The Commission today ann…

22 April – LAWFUEL – The Law News Network – The Commission today announced the issuance of an Order Instituting Administrative Proceedings, Making Findings, and Imposing Remedial Sanctions Pursuant to Section 15(b) of the Securities Exchange Act of 1934 (Order) against Fiserv Securities, Inc. (FSI), a broker-dealer registered with the Commission and headquartered in Philadelphia, PA, and Dennis J. Donnelly, of St. Davids, PA. From September 2001 until June 2004, Donnelly was Executive Vice President and Chief Operating Officer of FSI. Without admitting or denying the Commission’s findings, FSI and Donnelly consented to sanctions imposed by the Order.

The Commission’s Order finds that, between August 2002 and November 2003, two employees at FSI’s New York City office, Thomas J. Gerbasio and Raymond L. Braun, Jr., engaged in an illegal market timing scheme on behalf of two FSI hedge fund customers. In addition, between December 2000 and October 2002, a senior vice president in FSI’s Mutual Fund Department engaged in a late trading and market timing scheme in his personal trading accounts. Charles J. Addeo, a vice-president in FSI’s Philadelphia office, participated in both market timing schemes.

The Order finds that these employees defrauded hundreds of mutual funds and their shareholders by engaging in deceptive practices designed to circumvent the funds’ restrictions on market timing. In response to hundreds of notifications from mutual funds objecting to market timing trades, Gerbasio and Braun, assisted by Addeo, employed a variety of deceptive acts and practices, including misrepresenting the nature of the trades to the funds, opening dozens of accounts on behalf of their customers to conceal their identity from the funds, entering trades in amounts that would avoid the funds’ detection triggers, trading in funds that were less likely to detect the unwanted market timing, and advising their customers on strategies to conceal their market timing from funds that objected to this trading. In addition, the senior vice president, who also received kick-out letters as a result of trading in his own accounts, employed similar deceptive practices, and also engaged in illegal late trading. Through these activities, Gerbasio, Braun, Addeo and the senior vice president violated the antifraud provisions of the federal securities laws.

The Order finds that FSI failed reasonably to supervise Gerbasio, Braun, the senior vice president and Addeo, with a view to preventing their violations of the federal securities laws. In particular, FSI failed to adopt, implement or follow adequate supervisory and compliance policies, procedures or systems which could have detected or prevented its employees’ market timing and late trading schemes. In addition, FSI had insufficient procedures and systems in place regarding adequate responses to red flags and warnings of improper conduct, namely the hundreds of communications from mutual funds objecting to or questioning market timing. Finally, FSI had no procedures to detect and prevent late trading by its employees, and to ensure that the FSI system which prohibited late trading worked as intended.

The Order also finds that Donnelly, their supervisor, failed reasonably to supervise Gerbasio and Braun with a view to preventing their violations. During the relevant period, Donnelly was responsible for the management and supervision of FSI’s market timing business. Donnelly failed to review the trading activities engaged in by Gerbasio and Braun on behalf of their customers. Further, he was aware of correspondence received from the mutual funds seeking to restrict market timing trading, and failed to follow up and investigate these red flags.

The Commission ordered that FSI be censured; required to pay disgorgement in the amount of $5 million and a civil penalty in the amount of $10 million; and required to comply with certain undertakings. Donnelly was ordered suspended from association in a supervisory capacity with any broker or dealer for a period of nine months; and required to pay a civil penalty in the amount of $50,000.

Contact Persons:

Daniel M. Hawke, Associate District Administrator

David S. Horowitz, Assistant District Administrator

Philadelphia District Office

(215) 597-3100

COMMISSION SANCTIONS CHARLES J. ADDEO, FORMER VICE PRESIDENT OF FISERV SECURITIES, INC.

The Commission today announced the issuance of an Order Instituting Administrative and Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (Order) against Charles J. Addeo, of Sewell, New Jersey. Without admitting or denying the Commission’s findings, Addeo consented to the sanctions and cease-and-desist order imposed by the Order.

The Commission’s Order finds that, from 1995 until April 2004, Addeo was the vice president of mutual funds for Fiserv Securities, Inc. (FSI), a broker-dealer headquartered in Philadelphia, Pennsylvania. In this position, Addeo was responsible for the day-to-day operations of FSI’s Mutual Fund Department.

The Order finds that between August 2002 and October 2003, two employees at FSI’s New York City office, Thomas J. Gerbasio and Raymond L. Braun, Jr., engaged in an illegal market timing scheme on behalf of two FSI hedge fund customers. In addition, between December 2000 and October 2002, a senior vice president in FSI’s Mutual Fund Department engaged in a market timing and late trading scheme in his personal trading accounts. Addeo participated in both schemes, and enabled the market timing to continue despite having created the appearance of restricting such trading.

The Commission’s Order finds that, in response to hundreds of notifications from mutual funds objecting to market timing trades, Gerbasio and Braun engaged in a series of deceptive acts designed to conceal the hedge fund customers’ market timing activity from the mutual funds. In addition, the senior vice president, who also received kick-out letters as a result of trading in his own accounts, employed similar deceptive practices, and also engaged in illegal late trading.

The Order finds that Addeo received daily correspondence from mutual funds rejecting market timing trades, and requesting that FSI cease future market timing activity.

Addeo intentionally exempted the two hedge fund customers, as well as the senior vice president, from the only restrictions FSI had in place to comply with the mutual funds’ requests, enabling them to continue trading in funds that Addeo knew opposed this activity. In addition, Addeo frequently entered the senior vice president’s market timing trades for him, when instructed to do so.

The Order finds that Addeo willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission ordered that Addeo cease and desist from committing or causing any violations and any future violations of the provisions charged; be suspended from association with any broker or dealer for a period of twelve months; and pay a civil penalty in the amount of $30,000.

British MP George Galloway and his opponent the Daily Telegraph will leave no stone unturned to sort out what could be a spectacular libel case.