Administration April 2, 2006

Probes Launched Into Alleged Wachovia Trading Infractions

February 16, 2005 (PLANSPONSOR.com) - Wachovia Securities and the NASD have opened investigations into one of the brokerage's Westlake Village, California offices over possible stock trading abuses.
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According to the Los Angeles Times, NASD has launched an investigation into the possibility that traders had opened fictitious accounts to reap arbitrage profits off company stock. Wachovia announced that it was looking into the situation as well.

An anonymous letter sent to Wachovia warning the company that numerous traders at the office under investigation had opened fake accounts to take advantage of a company stock purchase plan in which shares are directly sold to investors at discounts of up to 5%, according to the Times. The traders would allegedly buy the shares at the discount, and through the accounts, turn around and sell them at market value, profiting from the spread between the two prices.

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Such accounts may violate regulations regarding “rules of fair practice”, the Times suggests. The creation of fictitious accounts also is against NASD rules, according to the paper.

The traders also allegedly traded in volumes exceeding the typical discount programs, according to sources. These limits are usually between $5,000 and $10,000 a month, according to the Times and the traders may have violated Wachovia’s stated limits.

Many of the stocks traded were real estate investment trust (REIT) shares, according to sources.

Administration April 1, 2006

Marsh Hit with Lagging Contingent-Commission Suit

January 4, 2006 (PLANSPONSOR.com) - Marshall & Ilsley Corp. (M&I), a banking and financial services company, filed suit against Marsh & McLennan Cos. Inc. in federal court in Milwaukee last month on charges that the broker secretly took kickbacks from insurers in the form of contingent commissions while placing the bank's coverage, Business Insurance reports.
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The bank is charging Marsh with breaches in fiduciary duty, also claiming it was unaware that Marsh collected interest income on M&I premiums held in fiduciary accounts before remitting them to underwriters.

Marsh previously settled bid-rigging charges for $850 million with clients who hired the company for insurance with inception dates from January 1, 2001 – December 31, 2004 (See  MMC Settles ‘Shameful’ Bid-Rigging Case ).   M&I hired Marsh in 1995, according to Business Insurance.

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Clients had until Sept. 20, 2005, to seek compensation from the $850 million fund and waive their right to sue Marsh.   Business Insurance said that about half of the 140,000 eligible clients opted to participate, including more than 90% of Marsh’s largest clients, the broker reported after the deadline passed.

The suit seeks restitution equaling the contingent commissions and interest income Marsh received on M&I’s business, along with punitive damages.

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