SEC v. Geek Securities, Inc.; Geek Advisors, Inc.; Kautilya "Tony" Sharma; and Neal R. Wadhwa, Southern District of Florida — Complaint

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF FLORIDA 
 
CASE NO. 04-80525 PAINE/JOHNSON 
(West Palm Beach Division) 
        
 
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
     Plaintiff,  : 
        : 
v.        : 
        :  
GEEK            SECURITIES,            INC.,                                                :            
GEEK            ADVISORS,            INC.,                                                            :                        
KAUTILYA            “TONY”            SHARMA,                                                :            
and            NEAL            R.            WADHWA,                                                            :            
       : 
                                                Defendants.                        :            
       : 
        :
 
 
COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF 
 
 
Plaintiff, Securities and Exchange Commission (“SEC” or “Commission”), alleges that: 
I.   
INTRODUCTION 
1.    The Commission brings this action to enjoin Defendants from committing further  
violations of the antifraud provisions of the federal securities laws in connection with market 
timing and late trading in the shares of mutual funds.   Between at least September 2001 and 
November 2003 (the “relevant period”), Kautilya “Tony” Sharma (“Sharma”) and Neal R. 
Wadhwa (“Wadha”), through Geek Securities, Inc. (“Geek Securities”), a broker-dealer, and its 
affiliated investment adviser, Geek Advisors, Inc. (“Geek Advisors”), engaged in pervasive 
market timing and late trading on behalf of at least nine institutional clients in over one hundred 
mutual funds.   Geek Securities engaged in these violations between at least September 2001 and 

November 2002.   In November 2002, Geek Securities transferred all of its customer accounts 
that were engaged in mutual fund market timing and late trading to Geek Advisors, where the 
illegal conduct continued through at least November 2003.    
2.  Sharma is the president of both Geek Securities and Geek Advisors and Wadhwa was  
a registered representative at Geek Securities and was also associated with Geek Advisors.   Both 
Sharma and Wadhwa defrauded mutual funds and their shareholders by engaging in a series of 
activities designed to circumvent the restrictions on market timing imposed by those mutual 
funds and by systematically engaging in a late trading scheme in those mutual fund shares. 
3. Through the activities alleged in this Complaint, each of the Defendants violated  
Section 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities 
Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder.  In addition, Geek 
Securities violated Section 15(c)(1) of the Exchange Act and Sharma and Wadhwa aided and 
abetted Geek Securities’ violations of Section 15(c)(1) of the Exchange Act. 
4. Accordingly, the Commission seeks:  (i) the entry of a permanent injunction  
prohibiting the Defendants from further violations of the relevant provisions of the Securities 
Act, the Exchange Act, and the rules thereunder;  (ii) disgorgement of ill-gotten gains, plus 
prejudgment interest;  and (iii) the imposition of civil money penalties against each Defendant 
due to the egregious nature of their violations. 
II.  
DEFENDANTS 
5. Defendant Geek Securities is a Delaware corporation with its principal office in Boca  
Raton, Florida.   Geek Securities has been registered with the Commission as a broker-dealer 
since 1984.   During the relevant period, Geek Securities was owned by Sharma. 
6. Defendant Geek Advisors is a Delaware corporation with its principal office in Boca  
 
2

Raton, Florida.   Geek Advisors has been registered as an investment adviser with the 
Commission since 2002 and is an affiliate of Geek Securities.  During the relevant period, Geek 
Advisors was also owned by Sharma. 
7. Defendant Sharma, age 39, is a resident of Delray Beach, Florida.  During the  
relevant period, Sharma was the president and owner of Geek Securities and Geek Advisors. 
8. Defendant Wadhwa, age 27, is a resident of Ft. Lauderdale, Florida.  During the  
relevant period, Wadhwa was a registered representative at Geek Securities and was associated 
with Geek Advisors.   
III.   
JURISDICTION AND VENUE 
9.   This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and  
22(a) of the Securities Act [15 U.S.C. §§77t(b), 77t(d) and 77v(a)] and Sections 21(d), 21(e), and 
27 of the Exchange Act [15 U.S.C. §§78u(d), 78u(e) and 78aa].    
10. Venue is proper in the Southern District of Florida because many of the Defendants’  
acts and transactions constituting violations of the Securities Act and the Exchange Act occurred 
in the Southern District of Florida.   In addition, the principal offices of Defendants Geek 
Securities and Geek Advisors are located in the Southern District of Florida and Defendants 
Sharma and Wadhwa reside in the Southern District of Florida. 
11. In connection with the conduct described in this Complaint, Defendants directly or  
indirectly made use of the mails or the means or instruments of transportation or communication 
in interstate commerce. 
IV.   
THE FRAUDULENT SCHEME 
A. 
Overview 
12. During the relevant period, Geek Securities and Geek Advisors had at least nine  
 
3

customers or clients, the majority of which were institutional investors, and several of which 
were hedge funds, for which it facilitated trades of third party mutual funds.   Geek Securities’ 
and Geek Advisors’ primary purpose with respect to those clients was to provide market timing 
and/or late trading services. 
13. Geek Securities and Geek Advisors maintained brokerage and investment advisory  
relationships, respectively, with each of its customers and clients.   For its services, Geek 
Securities received transaction-based commissions.  When the market timing and late trading 
business was transferred to Geek Advisors in November 2002,  Geek Advisors received a “wrap 
fee” of between one and two percent of the money it managed for the clients. 
14. At the direction and with full knowledge, approval and assistance of Sharma and  
Wadhwa, Geek Securities and Geek Advisors customers and clients consummated thousands of 
market timing and late trades in over one hundred mutual funds. 
B. 
Market Timing Activity 
15. “Market timing” includes (a) frequent buying and selling of shares of the same  
mutual fund or (b) buying or selling mutual fund shares in order to exploit inefficiencies in 
mutual fund pricing.  Market timing, while not illegal 
per se, can harm other mutual fund 
shareholders because it can dilute the value of their shares, if the market timer is exploiting 
pricing inefficiencies, or disrupt the management of the mutual funds’ investment portfolio and 
can cause the targeted mutual fund to incur costs borne by other shareholders to accommodate 
frequent buying and selling of shares by the market timer.   Most of the mutual funds purchased 
by the Defendants, on behalf of their customers and clients, tried to prevent market timing by 
prohibiting additional trades in their funds’ shares after a customer had placed a certain number 
of trades.   
 
4

16. Sharma and Wadhwa were aware that mutual fund companies deemed market  
timing to be improper and unacceptable. 
17. Between September 2001 and November 2003, mutual fund companies sent Geek  
Securities and Geek Advisors, directly and indirectly, warning letters, notices and e-mails blocking 
their clients’ ability to trade in mutual funds due to their market timing activities.  By October 2003, 
Geek Advisors’ clients had been banned from trading in all but about four mutual funds. 
18. Despite these warnings, Sharma and Wadhwa, through Geek Securities and Geek  
Advisors, used various deceptive activities to evade detection of ongoing market timing when a 
fund tried to restrict timing activities. 
19. Sharma and Wadhwa kept records tracking the various funds that restricted or prohibited  
its customers and clients from trading because of market timing.  
20. Sharma and Wadhwa, through Geek Securities and Geek Advisors also suggested that  
its customers or clients establish multiple accounts and use multiple clearing firms as a scheme to 
make it more difficult for mutual fund companies to detect market timing.  For example, many of 
Geek Securities and Geek Advisors’ institutional customers and clients had multiple accounts, each 
of which was under a different name but had the same beneficial owner.  Some customers and 
clients also used a combination of clearing firms, which Geek Securities and Geek Advisors 
referred to as “trading platforms,” to place their orders.  Wadhwa executed the mutual fund trades  
through these clearing firms.  Geek Securities and Geek Advisors did not execute any of the mutual 
fund trades itself in order to avoid detection by the mutual funds as the source of the market timing 
activities. 
21. Geek Securities and Geek Advisors also “cloned accounts,” moving funds from a  
 
5

blocked account over to a new account, within the same fund family, where the new account was 
under a different name but had the same beneficial owner.  This deceptive strategy allowed market 
timers to continue to place as many trades as possible through a fund family without detection after 
being banned due to market timing. 
22. Geek Securities and Geek Advisors further assisted its market timing clients by  
informing them of the extent the different mutual funds could detect market timing.  Geek Securities 
and Geek Advisors would recommend the maximum size of a trade that could be processed without 
detection as well as the possible number of round-trips a fund will allow before clients are 
prohibited from trading in a particular fund family.   
23. Geek Securities and Geek Advisors were notified on multiple occasions that trading  
would be prohibited in a mutual fund due to market timing activities.  For example, in 
approximately 91 instances, from April 2003 until October 2003, Geek Advisors was informed that 
all future trading in certain mutual funds would be prohibited due to market timing activities.  To 
illustrate, in one instance a fund imposed approximately $10,000 in redemption charges to a Geek 
Advisors client due to short-term trading.  In a letter to the client dated October 19, 2003, Wadhwa 
stated, “...we hit them pretty hard over the previous few months though if that possibly helps soften 
the blow.” 
24. In assisting clients with their market timing activity, the Defendants misrepresented  
and concealed their identity and the identities of their clients.  That information was material 
because it prevented the mutual funds from restricting the short term trading activity that the mutual 
funds were trying to prevent. 
 
 
 
6

C. 
Late Trading Activity
25. “Late trading” refers to the practice of placing orders to buy or sell mutual fund  
shares after close of the market at 4:00 p.m. EST, but at the mutual fund’s Net Asset Value 
(“NAV”), or price, determined at the market close.   Late trading enables to trader to profit from 
market events that occur after 4:00 p.m. EST but that are not reflected in that day’s price.   
26. Between September 2001 and November 2003, Sharma and Wadhwa, through Geek  
Securities and Geek Advisors, participated in a systematic scheme to late trade mutual fund shares 
on behalf of some of its customers and clients.   
27. According to Geek Advisors’ written agreement with its clients, preliminary trade  
instructions would not be accepted after 3:30 p.m. EST and final trade instructions would not be 
accepted any later than 3:59 p.m. EST. 
28. In many instances, however, Wadhwa received preliminary trading instructions from  
Geek Securities and Geek Advisors  customers or clients prior to the 4:00 p.m. EST closing of the 
market and then received final instructions after the 4:00 p.m. EST closing of the market.  Wadhwa, 
with Sharma’s knowledge and approval, would accept the final trade instructions after the 4:00 p.m. 
EST closing of the market and process them through a clearing firm, which accepted trades after 
4:00 p.m. EST, but received the same-day NAV pricing.  In some instances, the final trade 
instructions after the 4:00 p.m. EST closing required Wadhwa to not put through certain trades 
received earlier in the day. 
29. With the knowledge and approval of Sharma and Wadhwa, Geek Securities and Geek  
Advisors concealed its late trading activity by time stamping the preliminary trading instructions but 
not the actual final trade instructions, accepting the final trade instructions received after the cut-off 
 
7

by undocumented phone conversations, or by using a time stamp machine that, intentionally, did not 
reflect the accurate time.    
IV.   
CLAIMS FOR RELIEF 
COUNT I 
 
Fraud in Violation of Section 17(a)(1) of the Securities Act 
(As Against All Defendants) 
 
30. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 
31. Since a date unknown, but at least from September 2001 through November 2003,  
Defendants Geek Securities, Geek Advisors, Sharma and Wadhwa, directly and indirectly, by use of 
the means or instruments of transportation or communication in interstate commerce and by use of 
the mails, in the offer or sale of securities, as described in this Complaint, have knowingly or 
recklessly employed devices, schemes or artifices to defraud. 
32. By reason of the foregoing, Defendants Geek Securities, Geek Advisors, Sharma and  
Wadhwa, directly and indirectly, have violated and, unless enjoined will continue to violate, Section 
17(a)(1) of the Securities Act [15 U.S.C. §77q(a)(1)]. 
COUNT II 
 
Fraud in Violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder 
(As Against All Defendants) 
 
33. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 
34. Since a date unknown, but at least from September 2001 through November 2003,  
Defendants Geek Securities, Geek Advisors, Sharma and Wadhwa, directly or indirectly, by use of 
the means an instrumentality of interstate commerce, and of the mails in connection with the 
purchase or sale of the securities, as described in this Complaint, have knowingly or recklessly: (a) 
employed devices, schemes or artifices to defraud; (b) made untrue statements of material fact or 
 
8

omitted to state a material fact necessary to make the statements made, in the light of the 
circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices or 
courses of business which operated as a fraud upon the purchasers of such securities. 
35. By reason of the foregoing, Defendants Geek Securities, Geek Advisors, Sharma and  
Wadhwa, directly or indirectly, have violated and, unless enjoined with continue to violate, Section 
10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5], thereunder. 
COUNT III 
 
Fraud in Violation of Section 17(a)(2) and 17(a)(3) of the Securities Act 
(As Against All Defendants) 
 
36. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 
37. Since a date unknown, but at least from September 2001 through November 2003,  
Defendants Geek Securities, Geek Advisors, Sharma and Wadhwa, directly and indirectly, by use of 
the means or instruments of transportation or communication in interstate commerce and by use of 
the mails, in the offer or sale of securities, as described in this Complaint, have: (a) obtained money 
or property by means of untrue statements of material facts and omissions to state material facts 
necessary to make the statements made, in light of the circumstances under which they were made, 
not misleading; and/or (b) engaged in transactions, practices and courses of business which operated 
as a fraud or deceit upon purchasers and prospective purchasers of such securities. 
38. By reason of the foregoing, Defendants Geek Securities, Geek Advisors, Sharma and  
Wadhwa, directly and indirectly, have violated and, unless enjoined, will continue to violate, 
Sections 17(a)(2)  and 17(a)(3) of the Securities Act [15 U.S.C. §§77q(a)(2) and 77q(a)(3]. 
 
 
 
 
9

 
COUNT IV 
 
Violations of Section 15(c)(1) of the Exchange Act 
(As Against Defendant Geek Securities) 
 
39. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 
40. Since a date unknown, but at least from September 2001 through November 2003,  
Defendant Geek Securities directly or indirectly, and by the use of the means of instrumentalities of 
interstate commerce or of the mails, effected transactions in, or induced or attempted to induce the 
purchase or sale of a security by means of a manipulative, deceptive, or other fraudulent device or 
contrivance. 
41. By reason of the foregoing, Defendant Geek Securities has and, unless enjoined, will  
continue to violate Section 15(c)(1) of the Exchange Act.  [15 U.S.C. §780(c)(1)]. 
COUNT V 
 
Aiding and Abetting Violations of Section 15(c)(1) of the Exchange Act 
(As Against Defendants Sharma and Wadhwa) 
 
42. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 
43. Since a date unknown, but at least from September 2001 through November 2003,  
Defendants Sharma and Wadhwa knowingly or recklessly provided substantial assistance to, and 
thus aided and abetted, Geek Securities’ violations of Section 15(c)(1) of the Exchange Act [15 
U.S.C. §780(c)(1)]. 
V.  
RELIEF REQUESTED 
WHEREFORE, the Commission respectfully requests that this Court: 
A. 
Declaratory Relief 
Declare, determine and find that the Defendants committed the violations of the federal  
securities laws alleged in this Complaint. 
 
10

B.    
Injunctive Relief 
Enter a permanent injunction restraining the Defendants and their respective agents, 
servants, employees and attorneys and those persons in active concert or participation with them 
who receive actual notice of the injunction by personal service or otherwise, including facsimile 
transmission or overnight delivery service, from directly or indirectly engaging in violations of, or 
aiding and abetting violations of, Section 17(a) of the Securities Act [15 U.S.C. §77q(a)], Sections 
10(b) and 15(c)(1) of the Exchange Act [15 U.S.C. §78j(b) and §780(c)(1)] and Rule 10b-5 
thereunder [17 C.F.R. §240.10b-5]. 
C. 
Disgorgement 
Order the Defendants to disgorge their ill-gotten gains, plus pre-judgment interest. 
 
D. 
Civil Money Penalties 
Order each Defendant to pay an appropriate civil monetary penalty pursuant to Section 
20(d) of the Securities Act [15 U.S.C. §77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. 
§78u(d)(3)]. 
E. Further Relief 
Grant such other and further relief as may be necessary and appropriate. 
 
F. 
Retention of Jurisdiction
Further, the Commission respectfully requests that the Court retain jurisdiction over this 
action in order to implement and carry out the terms of all orders and decrees that may hereby be  
 
 
 
11

entered, or to entertain any suitable application or motion by the Commission for additional relief 
within the jurisdiction of this Court. 
 
Dated:   June 4, 2004 
                                                                        Respectfully            submitted,            
       /S/ 
                           
 
      Glenn S. Gordon 
                                                                        Associate            Regional            Director            
                                                                        Florida            Bar            No.            0052744            
                                                                        Direct            Dial:            (305)            982-6384            
      
      Teresa J. Verges 
      Assistant Regional Director 
                                                                        Florida            Bar            No.            0997651            
                                                                        Direct            Dial:            (305)            982-6384            
       
      Scott A. Masel 
      Senior Trial Counsel 
                                                                        Florida            Bar            No.            0007110            
                                                                        Direct            Dial:            (305)            982-6398            
                                                                        e-mail:                        [email protected]            
 
      Yolanda Gonzalez 
      Branch Chief 
                                                                        Florida            Bar            No.            0107042            
                                                Direct            Dial:            (305)            982-6390            
 
                                                                        Talitha            M.            Leacock            
      Staff Attorney 
Florida Bar No. 0145475 
Direct Dial: (305) 982-6373 
 
Attorneys for Plaintiff 
                                                                        SECURITIES            AND            EXCHANGE            COMMISSION            
      Southeast Regional Office 
                                                                        801            Brickell            Avenue,            Suite            1800            
                                                                        Miami,            Florida            33131            
                                                                        Telephone:            (305)            982-6300            
                                                                        Facsmile:                        (305)            536-4154            
 
12

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF FLORIDA 

 
CASE NO. 04-80525 PAINE/JOHNSON 

(West Palm Beach Division) 
         
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
     Plaintiff,  : 
        : 
v.        : 
        :  
GEEK SECURITIES, INC.,    : 
GEEK ADVISORS, INC.,     :  
KAUTILYA “TONY” SHARMA,    : 
and NEAL R. WADHWA,     : 

       : 
    Defendants.  : 
       : 

        :
 
 

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF 
 
 

Plaintiff, Securities and Exchange Commission (“SEC” or “Commission”), alleges that: 

I.   INTRODUCTION 

1.  The Commission brings this action to enjoin Defendants from committing further  

violations of the antifraud provisions of the federal securities laws in connection with market 

timing and late trading in the shares of mutual funds.   Between at least September 2001 and 

November 2003 (the “relevant period”), Kautilya “Tony” Sharma (“Sharma”) and Neal R. 

Wadhwa (“Wadha”), through Geek Securities, Inc. (“Geek Securities”), a broker-dealer, and its 

affiliated investment adviser, Geek Advisors, Inc. (“Geek Advisors”), engaged in pervasive 

market timing and late trading on behalf of at least nine institutional clients in over one hundred 

mutual funds.   Geek Securities engaged in these violations between at least September 2001 and 



November 2002.   In November 2002, Geek Securities transferred all of its customer accounts 

that were engaged in mutual fund market timing and late trading to Geek Advisors, where the 

illegal conduct continued through at least November 2003.    

2.  Sharma is the president of both Geek Securities and Geek Advisors and Wadhwa was  

a registered representative at Geek Securities and was also associated with Geek Advisors.   Both 

Sharma and Wadhwa defrauded mutual funds and their shareholders by engaging in a series of 

activities designed to circumvent the restrictions on market timing imposed by those mutual 

funds and by systematically engaging in a late trading scheme in those mutual fund shares. 

3. Through the activities alleged in this Complaint, each of the Defendants violated  

Section 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities 

Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder.  In addition, Geek 

Securities violated Section 15(c)(1) of the Exchange Act and Sharma and Wadhwa aided and 

abetted Geek Securities’ violations of Section 15(c)(1) of the Exchange Act. 

4. Accordingly, the Commission seeks:  (i) the entry of a permanent injunction  

prohibiting the Defendants from further violations of the relevant provisions of the Securities 

Act, the Exchange Act, and the rules thereunder;  (ii) disgorgement of ill-gotten gains, plus 

prejudgment interest;  and (iii) the imposition of civil money penalties against each Defendant 

due to the egregious nature of their violations. 

II.  DEFENDANTS 

5. Defendant Geek Securities is a Delaware corporation with its principal office in Boca  

Raton, Florida.   Geek Securities has been registered with the Commission as a broker-dealer 

since 1984.   During the relevant period, Geek Securities was owned by Sharma. 

6. Defendant Geek Advisors is a Delaware corporation with its principal office in Boca  

 2



Raton, Florida.   Geek Advisors has been registered as an investment adviser with the 

Commission since 2002 and is an affiliate of Geek Securities.  During the relevant period, Geek 

Advisors was also owned by Sharma. 

7. Defendant Sharma, age 39, is a resident of Delray Beach, Florida.  During the  

relevant period, Sharma was the president and owner of Geek Securities and Geek Advisors. 

8. Defendant Wadhwa, age 27, is a resident of Ft. Lauderdale, Florida.  During the  

relevant period, Wadhwa was a registered representative at Geek Securities and was associated 

with Geek Advisors.   

III.   JURISDICTION AND VENUE 

9. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and  

22(a) of the Securities Act [15 U.S.C. §§77t(b), 77t(d) and 77v(a)] and Sections 21(d), 21(e), and 

27 of the Exchange Act [15 U.S.C. §§78u(d), 78u(e) and 78aa].    

10. Venue is proper in the Southern District of Florida because many of the Defendants’  

acts and transactions constituting violations of the Securities Act and the Exchange Act occurred 

in the Southern District of Florida.   In addition, the principal offices of Defendants Geek 

Securities and Geek Advisors are located in the Southern District of Florida and Defendants 

Sharma and Wadhwa reside in the Southern District of Florida. 

11. In connection with the conduct described in this Complaint, Defendants directly or  

indirectly made use of the mails or the means or instruments of transportation or communication 

in interstate commerce. 

IV.   THE FRAUDULENT SCHEME 

A. Overview 

12. During the relevant period, Geek Securities and Geek Advisors had at least nine  

 3



customers or clients, the majority of which were institutional investors, and several of which 

were hedge funds, for which it facilitated trades of third party mutual funds.   Geek Securities’ 

and Geek Advisors’ primary purpose with respect to those clients was to provide market timing 

and/or late trading services. 

13. Geek Securities and Geek Advisors maintained brokerage and investment advisory  

relationships, respectively, with each of its customers and clients.   For its services, Geek 

Securities received transaction-based commissions.  When the market timing and late trading 

business was transferred to Geek Advisors in November 2002,  Geek Advisors received a “wrap 

fee” of between one and two percent of the money it managed for the clients. 

14. At the direction and with full knowledge, approval and assistance of Sharma and  

Wadhwa, Geek Securities and Geek Advisors customers and clients consummated thousands of 

market timing and late trades in over one hundred mutual funds. 

B. Market Timing Activity 

15. “Market timing” includes (a) frequent buying and selling of shares of the same  

mutual fund or (b) buying or selling mutual fund shares in order to exploit inefficiencies in 

mutual fund pricing.  Market timing, while not illegal per se, can harm other mutual fund 

shareholders because it can dilute the value of their shares, if the market timer is exploiting 

pricing inefficiencies, or disrupt the management of the mutual funds’ investment portfolio and 

can cause the targeted mutual fund to incur costs borne by other shareholders to accommodate 

frequent buying and selling of shares by the market timer.   Most of the mutual funds purchased 

by the Defendants, on behalf of their customers and clients, tried to prevent market timing by 

prohibiting additional trades in their funds’ shares after a customer had placed a certain number 

of trades.   

 4



16. Sharma and Wadhwa were aware that mutual fund companies deemed market  

timing to be improper and unacceptable. 

17. Between September 2001 and November 2003, mutual fund companies sent Geek  

Securities and Geek Advisors, directly and indirectly, warning letters, notices and e-mails blocking 

their clients’ ability to trade in mutual funds due to their market timing activities.  By October 2003, 

Geek Advisors’ clients had been banned from trading in all but about four mutual funds. 

18. Despite these warnings, Sharma and Wadhwa, through Geek Securities and Geek  

Advisors, used various deceptive activities to evade detection of ongoing market timing when a 

fund tried to restrict timing activities. 

19. Sharma and Wadhwa kept records tracking the various funds that restricted or prohibited  

its customers and clients from trading because of market timing.  

20. Sharma and Wadhwa, through Geek Securities and Geek Advisors also suggested that  

its customers or clients establish multiple accounts and use multiple clearing firms as a scheme to 

make it more difficult for mutual fund companies to detect market timing.  For example, many of 

Geek Securities and Geek Advisors’ institutional customers and clients had multiple accounts, each 

of which was under a different name but had the same beneficial owner.  Some customers and 

clients also used a combination of clearing firms, which Geek Securities and Geek Advisors 

referred to as “trading platforms,” to place their orders.  Wadhwa executed the mutual fund trades  

through these clearing firms.  Geek Securities and Geek Advisors did not execute any of the mutual 

fund trades itself in order to avoid detection by the mutual funds as the source of the market timing 

activities. 

21. Geek Securities and Geek Advisors also “cloned accounts,” moving funds from a  

 5



blocked account over to a new account, within the same fund family, where the new account was 

under a different name but had the same beneficial owner.  This deceptive strategy allowed market 

timers to continue to place as many trades as possible through a fund family without detection after 

being banned due to market timing. 

22. Geek Securities and Geek Advisors further assisted its market timing clients by  

informing them of the extent the different mutual funds could detect market timing.  Geek Securities 

and Geek Advisors would recommend the maximum size of a trade that could be processed without 

detection as well as the possible number of round-trips a fund will allow before clients are 

prohibited from trading in a particular fund family.   

23. Geek Securities and Geek Advisors were notified on multiple occasions that trading  

would be prohibited in a mutual fund due to market timing activities.  For example, in 

approximately 91 instances, from April 2003 until October 2003, Geek Advisors was informed that 

all future trading in certain mutual funds would be prohibited due to market timing activities.  To 

illustrate, in one instance a fund imposed approximately $10,000 in redemption charges to a Geek 

Advisors client due to short-term trading.  In a letter to the client dated October 19, 2003, Wadhwa 

stated, “…we hit them pretty hard over the previous few months though if that possibly helps soften 

the blow.” 

24. In assisting clients with their market timing activity, the Defendants misrepresented  

and concealed their identity and the identities of their clients.  That information was material 

because it prevented the mutual funds from restricting the short term trading activity that the mutual 

funds were trying to prevent. 

 

 

 6



C. Late Trading Activity

25. “Late trading” refers to the practice of placing orders to buy or sell mutual fund  

shares after close of the market at 4:00 p.m. EST, but at the mutual fund’s Net Asset Value 

(“NAV”), or price, determined at the market close.   Late trading enables to trader to profit from 

market events that occur after 4:00 p.m. EST but that are not reflected in that day’s price.   

26. Between September 2001 and November 2003, Sharma and Wadhwa, through Geek  

Securities and Geek Advisors, participated in a systematic scheme to late trade mutual fund shares 

on behalf of some of its customers and clients.   

27. According to Geek Advisors’ written agreement with its clients, preliminary trade  

instructions would not be accepted after 3:30 p.m. EST and final trade instructions would not be 

accepted any later than 3:59 p.m. EST. 

28. In many instances, however, Wadhwa received preliminary trading instructions from  

Geek Securities and Geek Advisors  customers or clients prior to the 4:00 p.m. EST closing of the 

market and then received final instructions after the 4:00 p.m. EST closing of the market.  Wadhwa, 

with Sharma’s knowledge and approval, would accept the final trade instructions after the 4:00 p.m. 

EST closing of the market and process them through a clearing firm, which accepted trades after 

4:00 p.m. EST, but received the same-day NAV pricing.  In some instances, the final trade 

instructions after the 4:00 p.m. EST closing required Wadhwa to not put through certain trades 

received earlier in the day. 

29. With the knowledge and approval of Sharma and Wadhwa, Geek Securities and Geek  

Advisors concealed its late trading activity by time stamping the preliminary trading instructions but 

not the actual final trade instructions, accepting the final trade instructions received after the cut-off 

 7



by undocumented phone conversations, or by using a time stamp machine that, intentionally, did not 

reflect the accurate time.    

IV.   CLAIMS FOR RELIEF 

COUNT I 
 

Fraud in Violation of Section 17(a)(1) of the Securities Act 
(As Against All Defendants) 

 
30. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 

31. Since a date unknown, but at least from September 2001 through November 2003,  

Defendants Geek Securities, Geek Advisors, Sharma and Wadhwa, directly and indirectly, by use of 

the means or instruments of transportation or communication in interstate commerce and by use of 

the mails, in the offer or sale of securities, as described in this Complaint, have knowingly or 

recklessly employed devices, schemes or artifices to defraud. 

32. By reason of the foregoing, Defendants Geek Securities, Geek Advisors, Sharma and  

Wadhwa, directly and indirectly, have violated and, unless enjoined will continue to violate, Section 

17(a)(1) of the Securities Act [15 U.S.C. §77q(a)(1)]. 

COUNT II 
 

Fraud in Violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder 
(As Against All Defendants) 

 
33. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 

34. Since a date unknown, but at least from September 2001 through November 2003,  

Defendants Geek Securities, Geek Advisors, Sharma and Wadhwa, directly or indirectly, by use of 

the means an instrumentality of interstate commerce, and of the mails in connection with the 

purchase or sale of the securities, as described in this Complaint, have knowingly or recklessly: (a) 

employed devices, schemes or artifices to defraud; (b) made untrue statements of material fact or 

 8



omitted to state a material fact necessary to make the statements made, in the light of the 

circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices or 

courses of business which operated as a fraud upon the purchasers of such securities. 

35. By reason of the foregoing, Defendants Geek Securities, Geek Advisors, Sharma and  

Wadhwa, directly or indirectly, have violated and, unless enjoined with continue to violate, Section 

10(b) of the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5], thereunder. 

COUNT III 
 

Fraud in Violation of Section 17(a)(2) and 17(a)(3) of the Securities Act 
(As Against All Defendants) 

 
36. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 

37. Since a date unknown, but at least from September 2001 through November 2003,  

Defendants Geek Securities, Geek Advisors, Sharma and Wadhwa, directly and indirectly, by use of 

the means or instruments of transportation or communication in interstate commerce and by use of 

the mails, in the offer or sale of securities, as described in this Complaint, have: (a) obtained money 

or property by means of untrue statements of material facts and omissions to state material facts 

necessary to make the statements made, in light of the circumstances under which they were made, 

not misleading; and/or (b) engaged in transactions, practices and courses of business which operated 

as a fraud or deceit upon purchasers and prospective purchasers of such securities. 

38. By reason of the foregoing, Defendants Geek Securities, Geek Advisors, Sharma and  

Wadhwa, directly and indirectly, have violated and, unless enjoined, will continue to violate, 

Sections 17(a)(2)  and 17(a)(3) of the Securities Act [15 U.S.C. §§77q(a)(2) and 77q(a)(3]. 

 

 

 

 9



 COUNT IV 
 

Violations of Section 15(c)(1) of the Exchange Act 
(As Against Defendant Geek Securities) 

 
39. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 

40. Since a date unknown, but at least from September 2001 through November 2003,  

Defendant Geek Securities directly or indirectly, and by the use of the means of instrumentalities of 

interstate commerce or of the mails, effected transactions in, or induced or attempted to induce the 

purchase or sale of a security by means of a manipulative, deceptive, or other fraudulent device or 

contrivance. 

41. By reason of the foregoing, Defendant Geek Securities has and, unless enjoined, will  

continue to violate Section 15(c)(1) of the Exchange Act.  [15 U.S.C. §780(c)(1)]. 

COUNT V 
 

Aiding and Abetting Violations of Section 15(c)(1) of the Exchange Act 
(As Against Defendants Sharma and Wadhwa) 

 
42. The Commission repeats and realleges paragraphs 1 through 29 of its Complaint. 

43. Since a date unknown, but at least from September 2001 through November 2003,  

Defendants Sharma and Wadhwa knowingly or recklessly provided substantial assistance to, and 

thus aided and abetted, Geek Securities’ violations of Section 15(c)(1) of the Exchange Act [15 

U.S.C. §780(c)(1)]. 

V.  RELIEF REQUESTED 

WHEREFORE, the Commission respectfully requests that this Court: 

A. Declaratory Relief 

Declare, determine and find that the Defendants committed the violations of the federal  

securities laws alleged in this Complaint. 

 10



B.    Injunctive Relief 

Enter a permanent injunction restraining the Defendants and their respective agents, 

servants, employees and attorneys and those persons in active concert or participation with them 

who receive actual notice of the injunction by personal service or otherwise, including facsimile 

transmission or overnight delivery service, from directly or indirectly engaging in violations of, or 

aiding and abetting violations of, Section 17(a) of the Securities Act [15 U.S.C. §77q(a)], Sections 

10(b) and 15(c)(1) of the Exchange Act [15 U.S.C. §78j(b) and §780(c)(1)] and Rule 10b-5 

thereunder [17 C.F.R. §240.10b-5]. 

C. Disgorgement 

Order the Defendants to disgorge their ill-gotten gains, plus pre-judgment interest. 

 

D. Civil Money Penalties 

Order each Defendant to pay an appropriate civil monetary penalty pursuant to Section 

20(d) of the Securities Act [15 U.S.C. §77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. 

§78u(d)(3)]. 

E. Further Relief 

Grant such other and further relief as may be necessary and appropriate. 

 

F. Retention of Jurisdiction

Further, the Commission respectfully requests that the Court retain jurisdiction over this 

action in order to implement and carry out the terms of all orders and decrees that may hereby be  

 

 

 11



entered, or to entertain any suitable application or motion by the Commission for additional relief 

within the jurisdiction of this Court. 

 

Dated:  June 4, 2004 

      Respectfully submitted, 

       /S/ 
                            
      Glenn S. Gordon 
      Associate Regional Director 
      Florida Bar No. 0052744 
      Direct Dial: (305) 982-6384 
      
      Teresa J. Verges 
      Assistant Regional Director 
      Florida Bar No. 0997651 
      Direct Dial: (305) 982-6384 
       
      Scott A. Masel 
      Senior Trial Counsel 
      Florida Bar No. 0007110 
      Direct Dial: (305) 982-6398 
      e-mail:  [email protected] 
 
      Yolanda Gonzalez 
      Branch Chief 
      Florida Bar No. 0107042 

    Direct Dial: (305) 982-6390 
 
      Talitha M. Leacock 
      Staff Attorney 

Florida Bar No. 0145475 
Direct Dial: (305) 982-6373 
 
Attorneys for Plaintiff 

      SECURITIES AND EXCHANGE COMMISSION 
      Southeast Regional Office 
      801 Brickell Avenue, Suite 1800 
      Miami, Florida 33131 
      Telephone: (305) 982-6300 
      Facsmile:  (305) 536-4154 

 12


	UNITED STATES DISTRICT COURT
	SOUTHERN DISTRICT OF FLORIDA
	COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF
	I.   INTRODUCTION