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Post date: July 7 2005

Broker Pleads Guilty To Late Trading

Attorney General Spitzer said today that a broker at a New York financial services firm has pleaded guilty to state criminal charges in connection with the ongoing investigation of illegal trading practices in the mutual fund industry.

In a related action, the Securities and Exchange Commission (SEC) announced a civil action against the individual, a 29-year-old broker employed at Trautman Wasserman & Company.

According to the Attorney General’s criminal charges and the SEC complaint, the broker, along with others at Trautman Wasserman, engaged in illegal late trading of mutual funds on behalf of several large hedge fund clients.

The broker pleaded guilty today in New York County Supreme Court to a violation of New York’s Martin Act, General Business Law § 352-c(6), a Class E felony, which is punishable by a maximum term of one to four years in state prison. This individual is cooperating with the Attorney General’s office.

According to the charges, the individual and others placed numerous mutual fund orders after 4 pm based on prices that were set before that time. This permitted Trautman Wasserman’s clients to capitalize on news events and market changes that occurred after the close of the stock market.

The individual is the seventh person to plead guilty to criminal charges since the Attorney General began an investigation of illegal trading in the mutual fund industry two years ago. Settlements negotiated by the office with a dozen firms have brought sweeping reform of the industry and returned more than $3.1 billion to investors.

Attorney General Spitzer thanked the SEC’s Northeast Regional Office for its cooperation in this matter.

The investigation was conducted by Assistant Attorneys General Harold Wilson of the Criminal Prosecutions Bureau and Maria Filipakis of the Investment Protection Bureau.