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A.G. Edwards Fired Brokers Over Fund Practices

Dec 15, 2003 | www.thestreet.com

A.G. Edwards has joined the long list of Wall Street firms that has fired some of its brokers over mutual fund trading practices that sources identified as market-timing.

TheStreet.com has learned that A.G. Edwards in October quietly fired two brokers from its brokerage office in the Back Bay section of Boston, after an internal inquiry into the firm's mutual fund trading practices.

The brokers, Charles Sacco and Joshua Boyle Jr., were both "discharged" on Oct. 14, for "business practices incompatible with those of the firm with respect to mutual funds,'' according to copies of their broker registration statements.

Industry sources said the two brokers, neither of whom could be reached for comment, allegedly were involved in market timing a legal but strongly discouraged trading strategy in which mutual fund shares are bought and sold frequently to capitalize on price discrepancies in different markets.

The rapid-fire trading is harmful for the vast majority of mutual fund investors because it can dilute the value of a fund by driving up trading and administrative costs. It is one of two trading practices that are regulators have focused on in the fast-expanding investigation of the $7 trillion mutual fund industry.

Margaret Welch, an A.G. Edwards spokeswoman, wouldn't comment on whether the two brokers were placing market timing trades for some of their customers. She said the firm doesn't comment on personnel issues.

But Welch said the brokerage has been reviewing its "policies and procedures regarding mutual fund transactions.''

A.G. Edward's Back Bay office, managed by Jeffery Robles, has drawn interest from securities regulators in recent weeks. TheStreet.com previously reported that investigators from NASD had interviewed an unidentified A.G. Edwards broker in Boston about trades he made on behalf of Atlantique Capital Advisors, a hedge fund that specializes in market timing mutual fund shares.

The $200 million Atlantique hedge fund, which recently ceased operations, has ties to Michael Sassano, an Oppenheimer & Co. broker who had one of the biggest books of market-timing clients on Wall Street. Sassano has piqued the interest of securities regulators investigating improper trading in the mutual fund industry because of his reputation as a big league market-timer and his ties to other brokers who have been implicated in the scandal.

So far, the largest group of brokers charged in the trading scandal had worked in the Boston office of Prudential Securities. (Prudential is jointly owned by Wachovia and Prudential Financial. In fact, both former A.G. Edwards brokers had previously worked for Prudential, with Sacco coming from the Boston office and Boyle working in one of the firm's New York offices.

Besides A.G. Edwards and Prudential, other Wall Street firms that have fired brokers in the trading scandal include Merrill Lynch, UBS, Bear Stearns, Citigroup, Bank of America and McDonald Investments, a unit of KeyCorp.


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