In response to the Securities and Exchange Commissions charges that it spent more than $600,000 on improper gifts and entertainment for Fidelity Investments traders, Lazard Capital Markets is paying $2.8 million to settle the charges.
Most notably, the SEC said that Lazard Capital Markets executives wooed former Fidelity equity trader Thomas H. Bruderman with lavish trips, often on private jets, to Europe, the Bahamas, the Caribbean, Florida and Napa Valley, Calif., inclusive of meals, expensive wine and lodging. Lazard Capital Markets executives even supplied Bruderman with race car driving lesions, adult entertainment and $50,000 toward an elaborate bachelor party for him in Miami.
Mutual fund traders owe their loyalty and allegiance solely to the funds and their investors, said George Curtis, deputy director of the SEC division of enforcement. When registered representatives provide mutual fund traders with prohibited travel, entertainment and gifts, it may impair their objective judgment and harm investors.
David P. Bergers, regional director of the SECs Boston regional office, added: Brokerage firms and their supervisory personnel must reasonably implement procedures to prevent employees from illegally providing compensation for brokerage business. The Commission will hold them accountable when they fail to do so.
Lazard Capital Markets consented to the order without admitting or denying the findings, and agreed to be censured and forfeit questionable profits of $1,817,629, plus prejudgment interest of $429,379.04 and a $600,000 penalty. The SEC said that Lazards brokerage commissions from Fidelity tripled between 2000 and 2004 to as much as $4 million a year.
Four former employees will also pay penalties of between $25,000 and $75,000 apiece and be suspended from the industry from between three months and nine months.
Fidelity already paid $8 million in March to settle the charges, while Jeffries paid $10 million in 2006. Fourteen of those two firms employees have reached tentative or final SEC settlements in the matter, including Fidelitys famous portfolio manager Peter Lynch, who paid $20,000 over accusations he accepted concert and sports tickets.