Prudential Receives Subpoena in Probe

Prudential Financial Inc., the third-largest U.S. life insurer, said Thursday that the federal prosecutor in Massachusetts had subpoenaed the company for documents pertaining to alleged improper trading of mutual fund shares.

Prudential Financial also has received a formal request for information from the New Jersey Bureau of Securities, according to a Securities and Exchange Commission filing by New Jersey-based Prudential.

U.S. Atty. Michael Sullivan of Massachusetts has convened a grand jury to investigate mutual fund trading abuses at companies including Prudential Securities Inc., the Boston Globe reported Thursday. The grand jury would present an opportunity to bring criminal charges in the growing investigation of the $7-trillion mutual fund industry.

The SEC and Massachusetts Secretary of the Commonwealth William Galvin last month filed complaints alleging that seven former Prudential Securities branch managers and brokers committed securities fraud in making short-term trades for hedge fund clients. The SEC also is suing the brokerage for failing to supervise the brokers.

Prudential Financial spokesman Bob DeFillippo said the company was cooperating with all inquiries and declined to comment further.

Prudential Securities became part of Wachovia Securities on July 1 when the life insurer sold the brokerage to Wachovia Corp. Prudential Financial kept 38% of the combined brokerage.

Also Thursday, Reuters reported that New York Atty. Gen. Eliot Spitzer had convened a grand jury to investigate allegations of illegal mutual fund trading at Security Trust Co. that cost its customers millions of dollars. The grand jury, meeting in secret, is hearing evidence and may consider handing up criminal indictments, sources said.

State and federal regulators last month charged senior officers of Phoenix-based Security Trust with grand larceny, falsifying business records and securities fraud.

A spokeswoman for Spitzer’s office declined to comment on the matter.