SEC Settles Charges with Financial Services Firm in ''Parking'' Scheme

The SEC found that a financial services firm failed to uncover its employee's illegal activities in a prearranged trading scheme.

According to the SEC's investigation, a firm employee arranged the sale of mortgage-backed securities to another trader at predetermined prices and then bought back the positions at a small markup and placed them in other accounts. The employee also sold bonds at above-market prices to avoid incurring losses in certain accounts and then repurchased them at unfavorable prices in another fund without disclosing the favorable treatment toward the selling clients to the disadvantaged fund client.

The firm agreed to pay $8.8 million to settle charges for violating Securities Act Section 17(a)(3) ("Fraudulent Interstate Transactions"), the Advisers Act Sections 206(2)("Prohibited Transactions by Investment Advisers") and 206(4) ("Prohibited Transactions by Investment Advisers") and Rule 206(4)-7 ("Compliance Procedures and Practices").