Prudential Equity Group agreed to pay a total of $600 million as part of a "global civil and criminal settlement" of market-timing allegations with regulators, said Walter Ricciardi, deputy director with the SEC's Division of Enforcement in Washington. Terms of the settlement call for $270 million to be paid to a distribution fund for the benefit of "those harmed by the fraud," as well as $325 million in criminal penalties to be paid to the Justice Department and $5 million in civil penalties to the Massachusetts Securities Division, according to a news release from the SEC. Regulators in the dispute were the SEC, the U.S. Attorney in Massachusetts; the Massachusetts Securities Division, the NASD, the New Jersey Bureau of Securities, the New York Attorney General and the New York Stock Exchange.
From at least September 1999 through June 2003, former registered representatives of the firm, then called Prudential Securities, used "deceptive market-timing practices to evade" restrictions that mutual funds were attempting to impose on market timers, according to the release. Officials at the firm knew about those practices and failed to curtail them, it said.
Prudential Equity Group did not admit or deny any wrongdoing, according to the release. The Prudential division in 2003 became part of a joint venture with Wachovia Corp., in which Wachovia holds a controlling 62% interest, said Prudential spokesman Bob DeFillippo. In a news release, Prudential said it had previously reserved sufficient funds to cover the needed payments.