Friday, 6 March 2015
Last updated 2 hours ago
Oct 25 2006 | 5:55pm ET
The NASD has imposed its largest fine ever against an individual for market timing. The regulatory agency issued a $2.25 million sanction against hedge fund manager Paul Saunders, chairman and CEO of Richmond, Va.-based James River Capital Corporation.
According to The NASD, Saunders used deceptive practices to market time through variable annuities and took approximately $750,000 in illicit profits. In addition to the fine, Saunders has also been suspended for 60 days.
The agency’s investigation into the activities of the brokers who assisted Saunders' market timing is continuing.
"Deceptive market timing designed to exceed prospectus limitations and evade insurance company and mutual fund restrictions not only violates ethical standards but may also harm investors," said James Shorris, executive vice president and head of enforcement.
JRCC is general partner and trading manager of the Jazzman Fund, a hedge fund established specifically to engage in market timing. After personally investing in Jazzman, Saunders, through JRCC, created 19 limited partnerships under Jazzman to increase the hedge fund's ability to market time mutual fund sub-accounts of variable annuities.
While each Jazzman partnership appeared to be a separate entity, with a different name and tax identification number, the partnerships all had common owners -- a fact that Saunders did not disclose to insurance companies that offered the variable annuities.
NASD found that from October 2001 through September 2003, Saunders used these Jazzman partnerships to engage in numerous deceptive practices to evade attempts by insurance companies to block or restrict his market timing in sub- accounts of variable annuities.
Saunders opened 20 different accounts for the Jazzman partnerships at one broker-dealer and commenced market timing through variable annuity sub- accounts, sometimes simultaneously purchasing contracts and trading in the same annuity through several Jazzman partnerships.
NASD has previously sanctioned 16 individual brokers, supervisors and principals for impermissible market timing, imposing fines ranging from $10,000 to $375,000 and suspensions ranging from 23 days to one year.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…