Overview
In a decision Wednesday in an SEC enforcement action, Judge Swain denied defendant Frederick O’Meally’s motion to set aside a jury verdict finding he engaged in a scheme to conceal his mutual fund “market timing.” O’Meally argued that, since his conduct involved technical matters outside the jury’s everyday experience, the SEC was required to provide expert testimony on the standard of care. Judge Swain disagreed:
At trial, two Prudential supervisors testified that Prudential received letters from fund companies seeking to stop certain brokers at Prudential from trading in their funds. The supervisors testified that they forwarded these letters to the appropriate broker, such as O’Meally, via facsimile or email. At trial, O’Meally testified that he never received these letters. He also testified that, when he learned that certain fund companies had sent letters seeking to block his trades, he did not believe that the fund companies actually intended to block his trades, despite the unequivocal statements contained in the fund companies’ letters. In other words, a supervisor sent O’Meally dozens of emails with instructions to stop doing a particular task—specifically, market timing in particular funds—but he continued to do that task, either because he did not read the emails or simply did not heed them. O’Meally's receipt and comprehension of that basic instruction to stop market timing is antecedent to, and separate from, the technical aspects of executing market timing trades. Whether a person is negligent in failing to read or heed basic instructions communicated through a supervisor at that person's place of employment is well within the common experience of most jurors.
