An SEC administrative law judge found that JB Oxford Holdings, Inc. “violated the forwarding pricing rule” when it executed trades after 4pm EST at the same day price, but found the firms former general counsel was not to blame.
ALJ Robert Mahoney determined that JB Oxford Holdings was involved in over 12,000 late mutual fund trades affecting over 600 funds in violation of “forward pricing” rules but dismissed charges against Scott G. Monson, JB Oxford Holdings Inc.’s former general counsel.
The SEC charges stated that seven JBOC clients were allowed to enter into transactions after market closing at prices established and Monson drafted a procedural agreement which allowed this. However, the ALJ said Monson was not to blame because he did not know what the prices were or that there was any issue regarding the legality of the trade time.
In the decision, Mahoney exonerated Monson since he was not aware there was a “forward pricing” rule during the time in question. Allegations that Monson should have known that the procedural agreement for mutual fund investments he together would play a part in JB Oxford Holdings’s mutual fund investments were also dismissed .
The ALJ said that Monson did act in a matter that “contributed to JBOC’s primary violations, but that Monson was not the reason JBOC violated the rule, regardless of whether or not the procedural agreement was used. The decision added that JBOC personnel did not consider late trading an issue even before Monson drafted the documents in question.
The decision stated that the SEC never charged Monson with determining whether the trading times allowed by the procedural agreement violated securities regulations. Although the ALJ found that Monson changed the times when ordered to do so by operations personnel, the CEO, and the assistant vice president of operations, he did not act independently.
The law judge concluded that the SEC did not prove there was a preponderance of evidence that Monson was aware of, or should have been aware of, the fact that the drafts would lead to JBOC’s primary violations.
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Related Web Resources:
View the ALJ’s Initial Decision (PDF)
Late Trading, SEC.gov