Between August 2002 and October 2003, two employees at FSI’s New York City office, Thomas J. Gerbasio and Raymond L. Braun, Jr., engaged in an illegal market timing scheme on behalf of two FSI hedge fund customers.2 Additionally, between December 2000 and October 2002, another employee, who was a senior vice president in the Mutual Fund Department of FSI’s Philadelphia office, engaged in a late trading and market timing scheme in his personal trading accounts.3 Charles J. Addeo, a vice-president in FSI’s Philadelphia office, participated in both market timing schemes. These employees defrauded hundreds of mutual funds and their shareholders by engaging in deceptive practices designed to circumvent the funds’ restrictions on market timing. In response to hundreds of notifications from mutual funds, including “kick-out letters” rejecting market timing trades, Gerbasio and Braun, assisted by Addeo, employed a variety of deceptive acts and practices including misrepresenting the nature 1 The findings herein are made pursuant to Respondents’ Offers of Settlement and are not binding on any other person or entity in this or any other proceeding. 2 Market timing includes: (i) frequent buying and selling of shares of the same mutual fund or (ii) buying or selling mutual fund shares in order to exploit inefficiencies in mutual fund pricing. Market timing, while not illegal per se, can harm other mutual fund shareholders because it can dilute the value of their shares, if the market timer is exploiting pricing inefficiencies, or disrupt the management of the mutual fund’s investment portfolio and can cause the targeted mutual fund to incur costs borne by other shareholders to accommodate frequent buying and selling of shares by the market timer. 3 Late Trading refers to the practice of placing orders to buy, redeem, or exchange mutual fund shares after 4:00 p.m. ET, the time as of which mutual funds typically calculate their net asset value (“NAV”), but receiving the price based on the prior NAV already determined as of 4:00 p.m. Late trading enables the trader to profit from market events that occur after 4:00 p.m. but that are not reflected in that day’s price. 2 of the trades to the funds, opening dozens of accounts on behalf of their customers to conceal their identity from the funds, entering trades in amounts that would avoid the funds’ detection triggers, trading in funds that were less likely to detect the unwanted market timing, and advising their customers on strategies to conceal their market timing from funds that objected to this trading. In addition, the senior vice president, who also received kick-out letters as a result of trading in his own accounts, employed similar deceptive practices, and also engaged in illegal late trading. Through these activities, Gerbasio, Braun, Addeo and the senior vice president violated the antifraud provisions of the federal securities laws.4