Products February 15, 2007

Schwab Puts Out Portfolio Product for Advisers, TPAs

Charles Schwab has launched the Schwab Advisor Portfolio, aimed at advisers and third party administrators (TPAs) interested in customizing the investment choices of their client plans, including adding separately managed accounts.
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A Schwab news release said that via Schwab Advisor Portfolio, advisers and TPAs can choose investment options from among all assets that can be held or traded at Charles Schwab & Co., which includes a mix of stocks, bonds, exchange-traded funds (ETFs), or other investments.

The announcement said the new product is designed for employer-directed defined benefit plans, pooled money purchase plans, and profit-sharing plans that are managed by an independent adviser and also use a directed corporate trustee.

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With the new product, Schwab said it now provides both trading and custody services, in addition to directed trustee services.

Advisers will have access to the firm’s managed account platform via Managed Account Select and Managed Account Access, Schwab’s bundled programs with $250,000 minimums for fixed income strategies and $100,000 for equity strategies, and Schwab Managed Account Marketplace, the open-architecture service that gives advisers the flexibility of working with whichever money manager they choose.

The announcement said that additional benefits of the new product include improved plan administration services through bank-certified trust statements, contribution processing, and payment services, combined with broker/dealer sub-custody services, electronic trading and data feeds through SchwabLink.

Compliance February 15, 2007

NASD Charges Prudential Brokers with Aiding Deceptive Market Timing

The National Association of Securities Dealers (NASD) has charged two former Prudential Securities Inc. (PSI), brokers in Utah for aiding a hedge fund manager’s deceptive practices to market time through variable annuities.
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According to a press release, the agency alleges that Jeffrey Doerr and David Corn helped Paul Saunders, a hedge fund manager and Chairman, CEO and majority owner of James River Capital Corporation of Richmond, Virginia, skirt insurance company restrictions on market timing.

NASD alleges that the two brokers helped Saunders bring in approximately $5.2 million in profits by executing an estimated 900 variable annuity sub-account exchanges between 2001 and 2003 that violated insurance restrictions or limitations. Doerr and Corn reaped $45,000 each in commissions.

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Particularly, NASD claims that the two opened 20 brokerage accounts for Saunders at PSI between 2000 and 2003 in the names of numerous limited partnerships that had the same beneficial owners as his market timing hedge fund. The agency says Doerr and Corn knew or should have known that Saunders would use these accounts for market timing and that the partnerships had the same beneficial owners.

Doerr and Corn helped Saunders, who it fined $2.25 million in October 2006, to evade the insurance company restrictions against market timing by using four separate broker identification numbers. After an insurance company placed a restriction on one account, Doerr and Corn would open a new one with a different number.

NASD also charged the brokers’ branch manager, Darrel Trost, with failing to supervise their activities.

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