New Jersey bars ex-Merrill brokers for market timing

BANGALORE (Reuters) - New Jersey's Bureau of Securities permanently barred three former Merrill Lynch brokers accused of helping a hedge fund make tens of thousands of improper trades in mutual funds.

Christopher Chung, Kevin Brunnock and William Savino will collectively pay $1.15 million in civil penalties, under terms of an administrative consent order, according to a statement from New Jersey's attorney-general.

The firms that employed the three individuals, UBS Financial Services and Merrill Lynch, previously paid the Bureau of Securities $24.75 million and $10 million in penalties, respectively, for failure to properly supervise them, according to the statement.

"We're holding both the employers and their employees accountable when securities laws are broken and professional standards of conduct are violated," New Jersey Attorney General Anne Milgram said.

"The hard-earned money of investors was put at unnecessary risk by the illegal actions of these individuals."

Susan Necheles, the lawyer for Chung and Savino, said her clients did not engage in any wrongdoing.

"After being wrongly fired by Merrill Lynch, Mr. Savino, Mr. Chung and Mr. Brunnock sued Merrill for wrongful termination," Nechelles wrote in an email to Reuters.

The court upheld an arbitration award, granting Savino, Chung and Brunnock a $14 million judgment against Merrill for wrongful termination, based on allegations of market timing, she said.

"In order to put this lawsuit -- which is already more than five years old -- behind them, Mr. Savino and Mr. Chung have now entered into a settlement in which they each agreed to pay New Jersey less than 10 percent of the money that Mr. Savino and Mr. Chung received from Merrill," Necheles said.

Brunnock's attorney did not immediately reply to a Reuters request for comment.

NYSE BAR

Last year, the New York Stock Exchange permanently barred the three.

Merrill fired the men in October 2003, and all have been out of the securities industry since December 2004, NYSE papers show. None admitted wrongdoing in agreeing to the NYSE bar. Regulators have accused the three, known as the CBS Group, of helping Millennium Partners LP, a $4 billion hedge fund, make more than 25,000 improper "market timing" trades from October 2000 to October 2003.

They said more than 19,000 of the trades came while the men worked at UBS AG's UBS PaineWebber Inc unit, and the rest after they joined Merrill in January 2002. Millennium was their main client.

Market timing involves rapid trading at the expense of ordinary investors who lack such privileges. It is widely considered improper, though not necessarily illegal.

(Editing by Erica Billingham)