Galvin said the timing occurred a "huge" number of times between December 2001 and October 2003 and that A.G. Edwards had "created a system and culture that allowed the representative's supervisors to ignore 'red flags'" that "defrauded" mutual fund companies and their shareholders. In fact, the firm even had specific guidelines to follow for creating accounts for market-timing clients, including obtaining indemnity agreements that lifted blame from A.G. Edwards for the activity, Galvin said.
This went against the mutual fund prospectuses that stated market timing was not permissible, as well as A.G. Edwards' own rules banning its reps from market timing, according to the complaint. "They knew it was wrong, and they sought to avoid the consequences," Galvin said.
In fact, "the very highest levels of management" were aware of the timing by Charles A. Sacco, a rep in one of A.G. Edwards' Boston offices, the secretary of the commonwealth charged. The complaint didn't name the hedge funds.