SEC sues Gabelli for market timing

Ex-execs committed securities fraud by allowing a hedge fund to profit by quickly trading shares, the SEC alleges.
APR 25, 2008
The Securities and Exchange Commission filed suit against two officials of Gabelli Funds LLC yesterday, claiming the money manager committed securities fraud by allowing a British hedge fund to profit by quickly trading shares on a mutual fund it managed. The suit, filed in U.S. District Court in Manhattan, claims that former Gabelli Funds portfolio manager Marc Gabelli and chief operating officer Bruce Alpert allowed the hedge fund Folkes Asset Management to profit from rapidly trading shares of the Gabelli Global Growth Fund. Gabelli Funds, an asset management arm of Gamco Investors Inc., both of Rye, N.Y., has already agreed to pay $16 million to shareholders to related SEC charges. But in the suit filed yesterday, the agency also sought civil penalties against the company along with forcing it to give up profits earned from its quick-trading practices from 1999-2002. The market timing allowed London-based Folkes (now known as Headstart Advisers Ltd.) to profit from inefficiencies in the mutual fund price and in return the hedge fund agreed to invest in a hedge fund that Gabelli managed, according to SEC officials. Mr. Gabelli's attorney, Lewis Liman, denied any wrong doing by his client. "We are puzzled by this action by the SEC and we will respond to it forcefully in court," he said in a statement. Folkes proceeded to earn returns as high as 185% over two years compared to -24% achieved by other Gabelli Global Growth shareholders, SEC officials said. Marc Gabelli is the son of Gamco founder and star investment adviser Mario Gabelli.

Latest News

Merrill lands four advisor teams as May recruiting data shows firm's two-way churn
Merrill lands four advisor teams as May recruiting data shows firm's two-way churn

Merrill's latest hires span Colorado to Louisiana, even as industry-wide recruiting data suggests the firm is losing almost as many advisors as it gains.

Fund manager sues Kandeo, alleges $100 million FinSocial loss
Fund manager sues Kandeo, alleges $100 million FinSocial loss

The $36 million buy allegedly hid inflated books and a $50 million diversion.

Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit
Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit

“An award citing emotional distress is very unusual,” an industry executive said.

Workplace financial education linked to stronger financial habits, but participation remains low
Workplace financial education linked to stronger financial habits, but participation remains low

New EBRI research found workers who participated in employer financial education reported higher confidence, literacy and financial satisfaction.

The rise of the super advisor: How AI is redefining competitive advantage in wealth management
The rise of the super advisor: How AI is redefining competitive advantage in wealth management

Beyond operational excellence, the winning advisors of the future are the ones who can reach across multiple disciplines without discarding specialist skills.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income