SEC Sues MFS Executive in Illegal Bond Tip Case

Federal regulators have again filed charges against a former executive of MFS Investment Management for allegedly enabling his firm to profit from an illegal tip when the government terminated its 30-year bond in 2001.

The Securities and Exchange Commission announced Thursday that it had filed the civil suit in U.S. District Court in Boston against Steven Nothern, who was a senior vice president at the investment firm. The SEC first sued Nothern in September 2003 but dropped the complaint two months later.

Nothern disputed the SEC’s allegations through his attorney, Nicholas Theodorou. “The allegations against Mr. Nothern are without merit,” Theodorou said. “Mr. Nothern intends to defend the case vigorously.”

The SEC alleges that Nothern received the tip from Peter Davis, a financial consultant who pleaded guilty in 2003 to providing the information before its public release that the Treasury Department would end sales of its benchmark 30-year bond.

The Treasury’s announcement Oct. 31, 2001, sparked a huge rally that day in the long-term bond.

MFS Investment Management was able to buy bonds with an edge on the rest of the market, illegally profiting from the tip, according to the SEC. Nothern allegedly bought $25 million in bonds based on the tip.

The Boston-based firm agreed in September 2003 to pay about $900,000 to settle SEC charges.

The Treasury carefully guards its quarterly news conferences to announce specifics of government bond sales. Attendees must agree not to release the information ahead of a preset time. Davis, who had been hired as a consultant by MFS Investment Management and Wall Street powerhouse Goldman Sachs & Co., attended the 2001 news conference and passed the information to certain individuals, authorities have said.

Goldman Sachs agreed to pay more than $9.3 million to settle SEC charges that one of its economists used Davis’ tip to make millions for the firm.