The National Association of Securities Dealers today announced that it has charged two brokers with facilitating a hedge fund manager’s deceptive practices to market time through variable annuities offered by three different life insurance companies.

Both brokers were registered with Prudential Securities Inc., but have since left the firm. The NASD also charged the brokers’ branch manager with failing to supervise their activities. None of the allegations have been proven.

Under NASD rules, a firm or individual named in a complaint can file a response and request a hearing before an NASD disciplinary panel. Possible remedies include a fine, censure, suspension or bar from the securities industry, disgorgement of gains associated with the violations, and payment of restitution.

“Deceptive market timing violates ethical standards and can harm long-term investors in mutual funds and variable annuities,” said James Shorris, NASD executive vice president and head of enforcement. “Brokers who actively facilitate the deceptive market timing conduct of their customers will be held accountable for this kind of misconduct.”

In its complaint, the NASD alleges that the brokers actively facilitated market timing activities by their customer – a hedge fund manager. The NASD fined him US$2.25 million in October 2006 – the largest sanction ever against an individual for deceptive market timing.

Also, last year, the NASD, federal and state securities regulators and the Department of Justice announced settlements and US$600 million in monetary sanctions against Prudential for misconduct involving improper market timing of mutual funds.