I assume the SEC has filed insider trading cases before alleging trading in the shares of a mutual fund, but honestly I cannot think of a single example. Today, though, the SEC filed a settled enforcement action charging Charles J. Marquardt with insider trading in the shares of the Evergreen Ultra Short Opportunities Fund (the “Ultra Fund”), a mutual fund that invested primarily in mortgage-backed securities.
The SEC alleges that at the time of his trading, Marquardt was a senior executive of Evergreen Investment Management Co., the investment adviser to the Ultra Fund. The SEC claims that on June 11, 2008, Marquardt learned that the Ultra Fund might soon reduce the value it assigned to several of its mortgage-backed securities holdings, a move that would likely decrease the Fund’s per-share net asset value and might cause the Fund to close. The next day, Marquardt allegedly redeemed all of his Ultra Fund shares and caused a family member to do the same. The SEC alleges that when the Ultra Fund later did, in fact, decrease the value it assigned to its holdings, its NAV fell, and Marquardt and his family member avoided losses of approximately $4,803 and $14,304, respectively.
