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Enjoined Rep Barred After Involvement In Mutual Fund Frequent Market Timing Trades

Scott B. Gann, Exchange Act Rel. 59-729, April 8, 2009

Time since appeal filed – 6 months 10 days
Time since last brief – 3 months 23 days
Pages – 9
Footnotes – 23


Gann was a senior vice-president of Southwest Securities a registered broker-dealer and investment adviser. He was enjoined from further anti-fraud violations and as a result was barred by the ALJ from association with a broker-dealer or investment adviser. The Commission affirmed the bar on appeal. Gann's injunction came in a Commission action that alleged he had facilitated frequent market timing mutual fund trades by a firm client. Among other things, the district court found that Gann continued to facilitate the timing trades after the mutual funds attempted to block the client from further trading. The Commission opinion noted that this was strong evidence of scienter. The Commission rejected Gann's argument that his conduct had not been recurring, noting that it spanned eight months and involved $650 million of trades at 165 mutual funds.


Why does the Commission continue to issue opinions in these cases when it has the ability to summarily affirm the ALJ's decision? It has previously ruled that "ordinarily, and in the absence of evidence to the contrary, it will be in the public interest to . . . bar from participation in the securities industry . . . a respondent who is enjoined from violating the anti-fraud provisions."  What was not ordinary about this case such that an opinion was needed?