Former Evergreen Investment Adviser Settles SEC Insider Trading Charges Involving Ultra Short Opportunities Fund

Charles Marquardt, Evergreen Investment Management Co. LLC’s former chief administrator, has settled charges filed by the US Securities and Exchange Commission that he sold Evergreen Ultra Short Opportunities Fund shares after obtaining insider information that a number of the MBS holdings were going to drop down in value. Marquardt worked for Evergreen at the time he allegedly engaged in insider trading and served as the Evergreen Ultra Short Opportunities Fund’s investment adviser. The mutual fund mostly invested in mortgage-backed securities.

On June 11, 2008, he allegedly found out about the likely decrease in value of several of its MBS holdings and that there was a possibility that the Ultra Fund could end up shutting down. Marquardt is accused of having redeemed all of his shares the following day. One of his family members also sold Ultra Fund shares. Marquardt and his relative avoided incurring $4,803 and $14,304 in financial losses, respectively. The fund was liquidated on June 19 of that year.

To settle the charges against him, the investment adviser has agreed to a bar from future violations, as well as to a two-year industry bar. He will pay a $19,107 civil penalty, $1,242 in prejudgment interest, and $19,107 in disgorgement. By settling, Marquardt is not admitting to or denying wrongdoing.

Insider trading is illegal and does not pay off. Just last month, in an unrelated case, investment banker Adhan S. Zaman pleaded guilty to one count of securities fraud. Zaman, who previously worked for Lazard Ltd., admitted to engaging in insider trading.

He is accused of misappropriating non-public, material data from the financial advisory and asset management company and of giving tips to other persons who then used the information to execute securities transactions. They also used insider trading tips that were given to Zaman by a friend that worked in an entity involved in the acquisitions of publicly-traded companies. Tipees made about $400,000, while Zaman was paid about $68,000 in benefits and cash.

Zaman faces up to 20 years in prison and the greater fine of either $5 million or two times the gross loss or gain. The US Sentencing Guidelines will have to be taken into consideration.

Related Web Resources:
SEC settles insider trading case, Boston.com, January 21, 2010 Former San Francisco, CA investment banker pleads guilty to insider trading, BNO News, January 16, 2010