The office manager and five of the 24 brokers in Prudential's (NYSE:PRU) Boston office were forced to resign after parent Wachovia (NYSE:WB) conducted an internal investigation into their mutual fund trading practices.
The six employees, including one of the offices largest revenue generators, were accused of taking advantage of the untimely nature of mutual fund share price updates. They basically purchased shares at the end of the trading day, hoping to take advantage of a quick move the following morning, a practice that's supposed to be prohibited by mutual fund companies.
Apparently, Wachovia conducted an internal review on the heels of a Boston Globe article that broke the story last Wednesday. And the company stated that the internal review is continuing, which suggests more heads may roll before this thing is put to rest.
State and federal regulators are currently investigating both mutual fund companies and brokerage firms in relation to the questionable trading activity.
The investigation was announced just weeks after the closing of a merger between Wachovia and Prudential's brokerage divisions. Wachovia has a 62% stake in the dynamic duo, which has become the third-largest brokerage firm in the business, behind only Merrill Lynch (NYSE:MER) and Citigroup's (NYSE:C) Salomon Smith Barney unit.
Despite the fact that these folks were taking advantage of the system, I'd really like to know if all this "rapid-fire trading" actually made any money. We've discussed countless examples here at the Fool where aggressive trading practices have resulted in huge losses for investors.
It would be interesting to see whether these folks were able to turn their unfair advantage into actual profits. If not, it appears they went through a lot of trouble for nothing, and lost their jobs to boot. Talk about adding insult to injury.
