The Securities and Exchange Commission is suing two ex-Morgan Stanley advisers for allegedly circumventing the market timing restrictions of 50 mutual fund companies, and, as a result, allegedly defrauding some 50 mutual fund companies.
Between January 2002 and August 2003, Former advisers Darryl Goldstein and Christopher O’Donnell earned about $1 million in fees and commissions because of their alleged misconduct. Attorneys for both men say their clients will fight the charges.
The SEC says that the two men, on more than one occasion, strategically engaged in several deceptive practices, including the opening of several brokerage accounts and trading in them, trading with variable annuity contracts, and using a number of financial advisor identification numbers while trading. The deceptive practices were meant to get around the restrictions that mutual funds had regarding market timing.
The two men allegedly were able to hide hedge funds trades valued at billions of dollars. The SEC says that they opened approximately 122 brokerage accounts.
Goldstein now works with Gilford Securities Inc., while O’Donnell is a Bear Stearns representative.
Morgan Stanley says it will pay $17 million in disgorgement, prejudgment interest, and a civil penalty for its alleged and related failure to prevent the alleged scam, which is against federal securities laws.
Another ex-Morgan Stanley adviser, Marc Plotkin, agreed to a one year ban from the industry and a 90,000 fine for his involvement while working with Goldstein. Plotkin and Morgan Stanley are not admitting to or denying the charges by agreeing to the penalties and fine.
Market timing can be very harmful to investors that end up suffering because an adviser tried to benefit financially by using prohibited practices.
Please contact Shepherd Smith and Edwards today if you have lost money because a member of the securities industry engaged in deceptive practices. You have every right to get your investment back and one of our securities fraud lawyers can help you.
Related Web Resources
SEC sues ex-Morgan Stanley financial advisers, Reuters, December 14, 2007
SEC Sues Two Former Morgan Stanley Financial Advisors for Deceptive Market Timing Activity; Morgan Stanley Consents to $17 Million Settlement in Related Administrative Proceeding, SEC.gov, December 14, 2007