Tuesday, December 18, 2007
The SEC recently filed a civil fraud action against two former Morgan Stanley DW, Inc. (MSDW) financial advisors, Darryl A. Goldstein and Christopher O'Donnell, for allegedly engaging in a fraudulent market timing scheme. The SEC alleged that Goldstein and O'Donnell engaged in a number of deceptive practices to defraud at least 50 mutual fund companies and their shareholders by circumventing the funds' restrictions on market-timing. The conduct alleged occurred from January 2002 until August 2003 and generated approximately $1 million in net commissions or asset-based fees for the defendants.
In a related administrative proceeding, Morgan Stanley & Co. Incorporated (MS&Co.), as successor to MSDW, consented to the issuance of a Commission order which found that MSDW failed reasonably to supervise four financial advisors who engaged in the fraudulent market timing scheme and also allowed multiple mutual fund trades to be placed or amended after the 4:00 p.m. ET close of trading but priced at the net asset value determined at the market close. Without admitting or denying the findings, MS&Co. consented to a censure and an order to pay disgorgement, including prejudgment interest, of $5,120,000 and a penalty of $11,880,000, for a total of $17 million.
In another related administrative proceeding, Marc H. Plotkin, a former MSDW financial advisor who worked with Goldstein, consented to the issuance of a Commission order which found that Plotkin willfully aided and abetted and caused securities fraud violations Without admitting or denying the findings, Plotkin consented to an order to pay a civil penalty of $90,000 and to be barred from association with any broker, dealer, or investment adviser with the right to reapply for association after one year.