EX-PRUDENTIAL SECURITIES Brokers accused in mutual fund scandal

The probe suggests misconduct by some mutual fund company employees.
BOSTON (AP) -- The growing mutual fund scandal hit Prudential Securities Inc. Tuesday as five former brokers and two former Boston branch managers were accused by regulators of improper trading, some of it allegedly hidden behind dummy names and numbers.
The regulators painted a disturbing portrait of an operation where brokers dodged rules barring market-timing by concealing their identities with intentionally misspelled names and false identification numbers -- then racked up millions of dollars in commissions and profits for hedge fund clients.
Market timing trades -- short-term, in-and-out buying and selling -- are not illegal, but the civil complaints by the Securities and Exchange Commission and Massachusetts Securities Division allege that the techniques used to evade mutual fund companies trying to shut down the brokers amounted to civil fraud.
The complaints also suggested that some unidentified mutual fund company employees may have undermined their own firms' prohibitions on market timing by tipping off the brokers on how to avoid detection by the fund companies.
Prudential implicated
Prudential, now controlled by Charlotte, N.C.-based Wachovia Corp., was not named in the complaints, though it is expected to be added as a defendant later, and was deeply implicated in the allegations outlined Tuesday. Authorities claimed Prudential received as many as 30,000 warning letters from at least 68 mutual fund companies trying to halt such trading in their funds but did not take appropriate action.
Prudential is the latest company to have executives or employees implicated in the scandal, which already forced the departure of CEOs from two other firms, Strong Mutual Funds and Putnam Investments. And the scandal is likely to keep spreading: the SEC's enforcement chief, Stephen Cutler, told Congress on Tuesday his agency will be notifying more companies this week that they face possible charges.
The complaints against Prudential allege that management essentially approved of the market timing practices as a business venture, although Prudential later prohibited market timing in its own family of mutual funds and, in January, advised its brokers to abide by the market timing policies of mutual funds in which it invested.
Prudential spokesman Jim Gordon said: "Our only comment is we have been and continue to cooperate fully with regulators."
The filings claim the operation at the Boston branch office generated as much as $5 million annually in commissions for the group, making the group's leader one of the company's top brokers nationwide. The complaint follows last week's allegations that Putnam Investments, a mutual fund company, allowed some customers and employees to engage in market timing trades.