27 Aug

Civil Settlement with Prudential Financial to be Announced

The United States Department of Justice, the Securities and Exchange Commission, the National Association of Securities Dealers and the New York Stock Exchange, are expected to announce a civil settlement with Prudential Financial Inc. on Monday. This will settle claims that brokers in the company’s securities unit assisted investors to rapidly trade mutual fund shares (known as market timing).

Five former Prudential Securities brokers and their branch manager in Boston were accused of assisting sophisticated investors to market time trades of mutual funds, with profits over $1.3 billion. Action is taken in cases like this because rapid trading tends to raise expenses and lower profits for long-term shareholders in a fund.

The settlement of about $600 million will be one of the biggest in the broad investigation of market timing, and will help the company avoid criminal prosecution. Prior to the Prudential settlement, total settlements of $3.5 billion were reached in the market timing scandal.