Fund Manager Guilty of Inside Trading

     BOSTON (CN) – A federal jury on Monday found a former mutual funds manager guilty of SEC charges that he made $3.1 million from inside trading. Steven E. Nothern traded ahead on embargoed information he received on October 2001, that the U.S. Treasury was about to stop issuing 30-year bonds.




     Nothern got the information from Peter J. Davis Jr., a Washington D.C. consultant who sold himself as a Wall Street insider with special access to “Washington information ahead of the media.” Davis settled charges that the SEC brought against him in 2003. Nothern also was charged in that civil complaint.
     Nothern, former senior vice president and manager of seven fixed income mutual funds for Massachusetts Financial Services, is the latest fund manager to be charged with insider trading related to the Oct. 31, 2001 press conference at which the Treasury announced it would no longer issue 30-year bonds.
     Davis attended that press conference and then informed some of his clients – including Nothern – of the Treasury’s decision minutes before the information was released to the public, in violation of an explicit agreement to keep the news secret until after it had been announced publicly.
     The Treasury’s announcement had a dramatic market impact, causing the largest one-day price movement in the 30-year bond since October 1987, according to the Securities and Exchange Commission.
     Nothern heard the news of the Treasury’s decision to stop issuing 30-year bonds from Davis on the morning of Oct. 31, 2001, and before the news became public he and other MFS portfolio managers bought $65 million in 30-year bonds for funds that they managed, generating approximately $3.1 million in illegal profits, the SEC said in a statement.
     In 2003, Davis, Goldman Sachs and MFS were ordered to pay more than $10.3 million in fines for releasing embargoed information.
     The jury in Nothern’s case found that he violated Section 10(b) of the Securities Exchange Act of 1934.

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