Compliance July 31, 2007

Prudential Executive Fined by SEC for Market Timing Scandal

The Securities and Exchange Commission (SEC) has fined former Prudential Securities executive Michael Rice and barred him from working in the securities industry for not putting a halt to improper market timing practices, Reuters reported.
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According to the news report, the SEC alleged that Rice headed the firm’s brokerage operation and was aware that some of Prudential’s brokers flouted warnings from mutual funds to stop market timing practices.

Rice neither admitted or denied the SEC’s charges, but will pay a $100,000 fine and is prohibited from supervising any broker dealer or investment adviser for 12 months.

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“Due in part to Rice’s failure to take effective action, the registered representatives’ widespread use of fraudulent and deceptive practices continued until at least June 2003,” the SEC said, according to Reuters.

Prudential agreed to pay $600 million to settle investigations of improper mutual fund trading in August.

The Markets July 31, 2007

Advisers Say Clients Like Managed Accounts

Managed money accounts (70%) top advisers’ rankings of investment vehicles “gaining the most favor″ with their clients.
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Alternative investments (52%) ranked second in the results of Brinker Capital’s second quarter Brinker Barometer, a quarterly gauge of financial adviser confidence and sentiment regarding the economy, retirement savings, investing and market performance.

The next most favorable investment vehicles are exchange-traded funds (45%), and stock mutual funds (39%), according to a Brinker press release. Advisers identified individual stocks (29%) and individual bonds (28%) as topping the “losing favor’ list, and bond mutual funds showed an almost 100% increase in “losing favor’ quarter over quarter (13% in Q2 vs. 7% in Q1).

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Twenty-seven percent of advisers identified procrastination as the chief obstacle to their clients saving for retirement, the release said. Other obstacles included extravagant lifestyles (18%), children’s college education (14%), health care costs (14%), and lack of concern (11%).

Overall, survey respondents were optimistic about the future of the country’s economy, with 81% saying they are either “highly confident’ or “somewhat confident’ about the economic outlook. This is an increase from 72% in the first quarter of 2007.

Advisers selected Washington policies (51%) and taxes (51%) as the issues that most negatively impact their clients’ accounts, followed by geopolitical developments (50%) and stock market volatility (47%).

Brinker Barometer results are based on responses from 205 advisers affiliated with insurance companies, independent broker-dealers and in sole practice. More information is at www.brinkercapital.com.

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