New York Attorney General Eliot Spitzer expects firms to go out of business as a result of the mutual fund investigation he launched in September, he told The Post late yesterday.
That stance is different from his approach to investigating major Wall Street brokerage firms for conflicts of interest in their research last year.
“The rules that have been violated have been clear; the criminal acts that we have seen evidence of are pervasive and beyond the pale,” Spitzer told The Post.
“As a consequence, certain entities will face what boiler rooms and other similarly situated entities have faced – they will be prohibited from doing business.”
Spitzer has been joined by the SEC, NASD and U.S. Attorney’s office in its inquiry into improper mutual fund trading.
The investigations have rattled the $7 trillion industry, as evidence of wrongdoing among portfolio managers and mutual fund companies has emerged on a daily basis.
The investigation also includes the role of brokers who facilitated trades and hedge fund managers who were, in some instances, making the trades.
Spitzer also told a crowd at the New York Society of Security Analysts that he expects “individuals will face criminal charges.”
This week, the SEC and Spitzer filed civil fraud charges against Gary Pilgrim and Harold Baxter, founders of mutual fund company Pilgrim Baxter & Associates, for securities fraud.
The SEC and Massachusetts regulators filed civil fraud charges against Putnam and two of its investment managers related to market timing activities.