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Former Bear Stearns broker seeks damages: US$30-million claim
Bloomberg News
By Yalman Onaran
September 6, 2006

Bear Stearns Cos. former broker Mark Hurant, who was fired in 2003 after the company said he helped clients make improper mutual-fund trades, filed an arbitration claim against the firm seeking US$30-million in damages.

Mr. Hurant made the filing last week with the National Association of Securities Dealers, his lawyer, Jacob Zamansky, said yesterday.

Bear Stearns dismissed Mr. Hurant after New York State Attorney General Eliot Spitzer began probing mutual funds for engaging in so-called market timing, which involves buying a fund's shares and then quickly selling them to profit from changes in the value of the fund's underlying holdings.

The company agreed in March to pay US$250-million to settle claims that it helped clients skirt trading rules.

Mr. Hurant was made a "scapegoat" to placate Mr. Spitzer and other regulators investigating the industry "in order to demonstrate that tough responsive action had been taken," the arbitration claim says.

Bear Stearns spokesman Russell Sherman declined to comment on Mr. Hurant's claims. The firm didn't admit or deny wrongdoing when it settled the case in March.

Mr. Hurant didn't know about the practice of market timing before coming to Bear Stearns and was educated by the company when a customer inquired about it in 1998, according to the claim.

Bear Stearns was aware of market-timing and helped support it, according to the claim. Most mutual-fund companies discourage the practice, saying it raises their costs and reduces gains for long-term holders.

The trades were carried out from 1999 to 2003 with the help of a "timing desk" that was supposed to block transactions with fund companies that objected to them, according to the Securities and Exchange Commission.

Regulators found that Bear Stearns also let brokers and hedge funds use its internal trade-processing system to place orders to buy or sell mutual funds after a regulatory cutoff at 4 p.m. each day in New York. Known as late trading, that practice is illegal.

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