A.G. Edwards Agrees To Pay $3.86 Million To Settle Charges; SEC Also Charges Two Brokers And Two Branch Managers With Misconduct
Washington, D.C., May 2, 2007 – LAWFUEL – The Law Newswire – The Securities and Exchange Commission today announced settled enforcement proceedings against A.G. Edwards & Sons, Inc., alleging 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, a registered broker-dealer headquartered in St. Louis, Mo., 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. A.G. Edwards also agreed to certain undertakings, including hiring an independent consultant to review whether the changes A.G. Edwards has made to its policies and procedures are reasonably designed to prevent and detect future market timing activity.
The SEC also announced the institution of settled enforcement proceedings against a former registered representative in A.G. Edwards’ Boston Back Bay, Mass., 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, Fla., 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. 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.
Merri Jo Gillette, Regional Director of the SEC’s Chicago Regional Office, said, “By failing to develop or adopt reasonable policies to prevent its registered representatives’ misconduct, A.G. Edwards ignored its responsibility to reasonably supervise its registered representatives.”
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.