Ex-fund manager liable for insider T-bond trading

WASHINGTON (Reuters) - A former manager of fixed income mutual funds for Massachusetts Financial Services was found liable for insider trading of 30-year Treasury bonds, federal securities regulators said on Monday.

Steven Nothern, former MFS senior vice president, was accused of generating some $3.1 million (1.9 million pounds) in illegal profits after finding out on October 31, 2001 that the Treasury Department had decided to stop issuing the long bond, the U.S. Securities and Exchange Commission said in a statement.

According to the SEC, Nothern obtained the market-sensitive information from a Washington consultant, Peter Davis, who was allowed to attend the Treasury Department's quarterly refunding news conferences on the condition he honour the news embargo imposed by the government until the designated public announcement time.

On October 31, 2001, the news conference ended at about 9:25 a.m. ET and Davis allegedly placed a series of cell phone calls to his clients, including Nothern, the SEC said. Nothern knew about the department's plan to stop issuing 30-year bonds before the public announcement at 10 a.m. ET and he and other MFS portfolio managers that he tipped bought $65 million in par value of 30-year bonds, according to the SEC lawsuit.

The Boston jury hearing the civil case returned a verdict on Monday that Nothern violated federal securities law.

The SEC wants the court to require Nothern to turn over his illegal profits and to impose a civil penalty.

"The verdict makes clear that it's illegal to traffic in confidential market-sensitive information about government securities," said Erica Williams, the SEC's lead trial attorney in the case.

The case is Securities and Exchange Commission v. Steven E. Nothern, U.S. District Court, District of Massachusetts, No. 05-10983.

(Reporting by Julie Vorman; editing by Andre Grenon)