he fund industry had better tread with care; the Securities and Exchange Commission has settled its first case as part of an effort to crack down on portfolio pumping and window dressing by funds. This week to firms settled allegations with the SEC and agreed to pay fines related to alleged portfolio pumping. Two former employees also agreed to settlements. The SEC also censured both firms and suspended both employees from the industry for a limited period.
The US unit of ABN AMRO Holding NV
and Boston-based Oechsle International
Advisors both agreed to pay $200,000 in fines to settle allegations that former employees manipulated prices of securities held in funds through improper trading. The former employees also agreed to each pay fines of $75,000.
The fines were related the failure of both firms to properly supervise employees who purchased securities at the end of the second and third quarters in 1998 with the aim of raising the fund's value.
None of the four parties involved in the allegations either admitted or denied the allegations.
The SEC alleged that taped phone conversations show traders at the two firms -- Angelo Iannone, ABN AMRO's former head of international equities sales trading and Andrew Parlin, a former portfolio manager at Oechsle -- discussed stocks that could easily be moved by orders placed by their funds.
ABN AMRO turned in the pair to the SEC when it uncovered the suspicious trades in the Winter of 1998.
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