SEC Press pdf 146 KB 18,343 chars

In re WILLIAM M. ENNIS

Exhibit of Press Release: Evergreen Investment Management Company and Affiliates to Pay $32.5 Million to Settle Market Timing Violations
Source PDF JSON
summary

William M. Ennis, former president of Evergreen Investment Company, knowingly permitted a registered representative to conduct 386 excessive market timing trades totaling $282.4 million in the Evergreen Small Company Growth Fund, violating prospectus limits and concealing the arrangement from the fund’s board, resulting in a one-year industry bar, a $150,000 civil penalty, and $1 in disgorgement by the SEC.

paragraph

William M. Ennis, while serving as president of Evergreen Investment Company, authorized a registered representative to execute 386 market timing trades in the Evergreen Small Company Growth Fund between January 2001 and March 2003, totaling $282.4 million, in direct violation of the fund’s prospectus limits of five annual exchanges. He concealed this arrangement from the fund’s board of trustees despite signing multiple registration statements that incorporated the very exchange restrictions he was circumventing, thereby violating Sections 206(1), 206(2) of the Investment Advisers Act, Section 34(b) of the Investment Company Act, and Section 17(d) with Rule 17d-1. The SEC imposed a one-year bar from the securities industry, a $150,000 civil penalty, and $1 in disgorgement, all payable to a Fair Fund for harmed shareholders, with Ennis agreeing not to seek offsets in related investor actions.

narrative

William M. Ennis, former president of Evergreen Investment Company, Inc., knowingly authorized a registered representative to conduct 386 market timing trades in the Evergreen Small Company Growth Fund between January 2001 and March 2003, totaling $282.4 million, despite the fund’s prospectus explicitly limiting exchanges to three per quarter and five per year. Ennis, who also served as a control person for the investment adviser and chief executive of the Evergreen mutual fund complex, was fully aware of Evergreen’s anti-market timing policy but deliberately concealed the arrangement from the fund’s board of trustees. He signed multiple registration statements that incorporated the prospectus’s exchange limits, thereby falsely certifying compliance while actively enabling violations. The SEC found that his conduct violated Sections 206(1), 206(2) of the Investment Advisers Act, Section 34(b) of the Investment Company Act, and Section 17(d) with Rule 17d-1, as his actions harmed fund shareholders through dilution and increased transaction costs. As part of a settled administrative proceeding, Ennis consented to a one-year bar from association with any broker, dealer, investment adviser, or investment company, a $150,000 civil penalty, and $1 in disgorgement—all to be paid into a Fair Fund for the benefit of harmed investors. He also agreed not to seek any offset or reduction of the penalty in related investor litigation and pledged to repay any such offset to the U.S. Treasury or Fair Fund if granted. The SEC accepted his offer of settlement without admitting or denying the findings, except as to jurisdiction and subject matter.

Enriched metadata

Scheme
market-manipulation (100%)
Outcome
settled
Disgorgement
$1
Civil penalty
$150,000
Victim loss
$3,000,000,000
Classified market-manipulation(confidence 100%). EDGAR detection: forms SC 13D/G/13F· recall 53% / precision 9%. detection rule →
Statutes
SECTIONS 15(b)(6) and 17A(c)(4)(C) OF THE SECURITIES EXCHANGE ACTSECTIONS 15(b)(6) and 17A(c)(4)(C) OF THE SECURITIES EXCHANGE ACTSECTIONS 15(b)(6) and 17A(c)(4)(C) OF THE SECURITIES EXCHANGE ACTSECTIONS 15(b)(6) and 17A(c)(4)(C) OF THE SECURITIES EXCHANGE ACTSECTIONS 203(f) AND 203(k) OF THE INVESTMENT ADVISERS ACTSECTIONS 203(f) AND 203(k) OF THE INVESTMENT ADVISERS ACTSECTIONS 9(b) AND 9(f) OF THE INVESTMENT COMPANY ACTSECTIONS 9(b) AND 9(f) OF THE INVESTMENT COMPANY ACTSection 34(b) of the Investment Company ActSection 17(d) of the Investment Company ActSection 203(k) of the Advisers Act and Section 9(f) of the Investment Company ActSection 203(f) of the Advisers Act and Section 9(b) of the Investment Company ActSections 15(b)(4), 17A(c)(3) and 21C of the Securities Exchange ActSections 15(b)(4), 17A(c)(3) and 21C of the Securities Exchange ActSections 203(e) and 203(k) of the Investment Advisers ActRule 17d-1
Parties
evergreen investment company, inc.evergreen investment management company, llcevergreen investment services, inc.evergreen service company, llcSecurities and Exchange Commissionwilliam m. ennis
Keywords
fundenniscompanyinvestmentcommissionevergreenmarket timingorderinvestment companyregistered representativetimingsecuritieswhichgrowth fundexchange

Extracted insights

Dollar amounts 8
  • $312.00B $312 billion ≥$1B
  • $3.00B $3 billion ≥$1B
  • $2.00B $2 billion ≥$1B
  • $282.40M $282.4 million $100M–$1B
  • $2.20M $2.2 million $1M–$10M
  • $500K $500,000 $100K–$1M
  • $150K $150,000 $100K–$1M
  • $50K $50,000 $10K–$100K
Entities 6
  • company evergreen investment company, inc.
  • company evergreen investment management company, llc
  • company evergreen investment services, inc.
  • company evergreen service company, llc
  • agency Securities and Exchange Commission
  • person william m. ennis
Triples 10
  • William M. Ennis was former president of Evergreen Investment Company, Inc.
  • Evergreen Investment Company, Inc. is corporate parent of Evergreen Investment Management Company, LLC
  • Evergreen Investment Management Company, LLC is registered investment adviser for Evergreen Fund Family
  • Evergreen Investment Management Company, LLC is based in Boston
  • Evergreen Investment Services, Inc. is affiliated registered broker-dealer of Evergreen Investment Management Company, LLC
  • Evergreen Service Company, LLC is affiliated transfer agent of Evergreen Investment Management Company, LLC
  • William M. Ennis involved in market timing agreement permitting Frequent Trades in Evergreen Small Company Growth Fund Exceeding Exchange Limits
  • SEC instituted administrative and cease-and-desist proceedings against William M. Ennis
  • SEC released order on September 19, 2007
  • William M. Ennis submitted offer of settlement to SEC
PDF
In re WILLIAM M. ENNIS · Source
Text layers
Extracted body text (18,343c) 

 
 UNITED STATES OF AMERICA 
                                                                     Before                                                                     the                                                                     
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No.  56464 / September 19, 2007 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No.  2649 / September 19, 2007 
 
INVESTMENT COMPANY ACT OF 1940 
Release No. 27974 / September 19, 2007 
 
ADMINISTRATIVE PROCEEDING 
File No.  3-12806 
 
 
 
In the Matter of 
 
            WILLIAM            M.            ENNIS,            
Respondent. 
 
 
 
 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-AND-
DESIST ORDER PURSUANT TO SECTIONS 
15(b)(6) and 17A(c)(4)(C) OF THE SECURITIES 
EXCHANGE ACT OF 1934, SECTIONS 203(f) 
AND 203(k) OF THE INVESTMENT ADVISERS 
ACT OF 1940 AND SECTIONS 9(b) AND 9(f) OF 
THE INVESTMENT COMPANY ACT OF 1940 
 
I. 
 
The Securities and Exchange Commission (ACommission@) deems it appropriate and in the 
public interest that public administrative and cease-and-desist proceedings be, and hereby are, 
instituted pursuant to Sections 15(b)(6) and 17A(c)(4)(C) of the Securities Exchange Act of 1934 
(AExchange Act@), Sections 203(f) and 203(k) of the Investment Advisers Act of 1940 (AAdvisers 
Act@) and Sections 9(b) and 9(f) of the Investment Company Act of 1940 (AInvestment Company 
Act@) against William M. Ennis (ARespondent@ or AEnnis@). 
 
II. 
 
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of 
Settlement (the AOffer@), which the Commission has determined to accept.  Solely for the purpose of 
these proceedings and any other proceedings brought by or on behalf of the Commission, or to which 
the Commission is a party, and without admitting or denying the findings herein, except as to the 
Commission=s jurisdiction over him and the subject matter of these proceedings, which are admitted, 
Respondent consents to the entry of this Order Instituting Administrative and Cease-and-Desist 
Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order 

 
 
2
Pursuant to Sections 15(b)(6) and 17A(c)(4)(C) of the Securities Exchange Act of 1934, Sections 
203(f) and 203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the 
Investment Company Act of 1940 (AOrder@), as set forth below.   
 
III. 
 
On the basis of this Order and Respondent=s Offer, the Commission finds
1
 that: 
 
Summary 
 
1. This is a proceeding against Ennis, the former president of the Evergreen Investment 
Company, Inc. (AEIC@), the corporate parent of Evergreen Investment Management Company, LLC 
(AEIMCO@), the Boston-based registered investment adviser for the Evergreen fund family, 
Evergreen Investment Services, Inc. (AEIS@), EIMCO=s affiliated registered broker-dealer, and 
Evergreen Service Company, LLC (AESC@), EIMCO’s affiliated transfer agent (collectively, 
AEvergreen@), based on his involvement in a market timing agreement that permitted a registered 
representative to make, on behalf of certain of his customers, frequent trades in the Evergreen Small 
Company Growth Fund (now known as the Mid Cap Growth Fund) in excess of the exchange limits 
set forth in the fund=s prospectus.   
 
2. 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 fund=s 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. 
 
3. In January 2000, Ennis, then the senior vice president of EIC, agreed to permit 
a registered representative to market time one or more Evergreen funds on behalf of certain of his 
customers even though he knew that Evergreen had an anti-market timing policy, consistent with 
which each Evergreen fund prospectus limited exchanges to three per calendar quarter and five per 
calendar year, and even though he knew that market timing could disrupt fund management and harm 
fund performance.  The registered representative subsequently made approximately 386 exchanges 
into and out of the Evergreen Small Company Growth Fund from approximately January 2001 
through March 2003.  This timing activity harmed the fund.  From January 2001 through March 
2003, Ennis signed several Small Company Growth Fund registration statements, each of which 
incorporated the fund=s prospectus and the exchange limits contained therein.  At no point during the 
period in which the registered representative was making these exchanges did Ennis disclose the 
market timing arrangement to the fund=s board of trustees. 
                                                 
1
  The findings herein are made pursuant to Respondent=s Offer of Settlement and are not binding on 
any other person or entity in this or any other proceeding.
 

 
 
3
 
Respondent 
 
4. William M. Ennis was employed at Evergreen from 1994 to June 2003, when he 
resigned.  In December 1996, Ennis was named a senior vice president of EIC and, in April 2000, 
Ennis became EIC=s president.  During the relevant period, Ennis served as a director of and control 
person for EIMCO, he supervised the president of EIS, he was the president of the Evergreen Equity 
Trust, a registered investment company of which the Small Company Growth Fund was a series, and 
he functioned as the chief executive officer of the Evergreen mutual fund complex.  Ennis, age 46, is 
a resident of Charleston, South Carolina. 
 
Related Entities 
 
5. EIC is a wholly owned holding company subsidiary of Wachovia Corporation, a 
Charlotte, North Carolina based company whose common stock is registered with the Commission 
and principally trades on the New York Stock Exchange.  EIC owns EIMCO, EIS, and ESC 
(collectively, AEvergreen@).   The Evergreen fund family is one of the 20 largest fund groups in the 
nation.  As of March 31, 2007, EIMCO had more than $312 billion in assets under management.   
 
6. Wachovia Securities, LLC is a Richmond-based registered broker-dealer that is a 
majority-owned subsidiary of Wachovia Corporation. 
 
Facts 
 
The Market Timing Agreement 
 
7. In January 2000, Evergreen had in place an Aanti-market timing@ policy through which 
it sought to eliminate market timing in the Evergreen funds.  Consistent with this policy, each 
Evergreen fund prospectus contained a provision stating that: AExchanges are limited to three per 
calendar quarter, but in no event more than five per calendar year.@  In January 2000, Ennis was 
familiar with the exchange limit provision set forth in each Evergreen fund prospectus, he understood 
that a market timer might make more than three exchanges per quarter and five per year, and he was 
aware that market timing could impose trading costs on a fund, disrupt fund management and harm 
fund performance.  
 
8. In January 2000, the retail division of Wachovia Securities, then operating under the 
name First Union Securities, Inc. (which was under common control with Evergreen at the time), was 
the number one distributor of Evergreen funds, accounting for about $2 billion of the funds= 
approximately $3 billion in total annual sales.  In early January 2000, Wachovia Securities= Private 
Client Group (APCG@), the firm=s non-bank branch based division, notified an EIS vice president that 
it was attempting to recruit a top-producing registered representative, who was seeking permission to 
market time one or more Evergreen funds on behalf of certain of his customers.  Convinced that it 
would otherwise be unable to hire the recruit, the PCG asked the EIS vice president if Evergreen 
would be willing to accommodate the recruit=s market timing activity.  After EIS= president and 

 
 
4
EIMCO=s chief investment officer for equities denied it, the EIS vice president, at the request of the 
PCG=s president, presented the timing request to Ennis, who was trying at that time to improve 
Evergreen=s sales and distribution through the PCG channel.  Despite being told by the EIS vice 
president that both the EIS president and EIMCO=s chief investment officer for Equities had rejected 
it, Ennis granted the PCG=s timing request.  Noting that the PCG might not land the recruit, Ennis 
ordered that this arrangement be kept confidential, specifically instructing that the EIS president not 
be informed of it.  
 
9. In approximately January 2001, the registered representative joined Wachovia 
Securities and began trading in the Small Company Growth Fund on behalf of certain of his 
customers.  From that time through March 2003, the registered representative made approximately 
386 exchanges into and out of the fund, thus greatly exceeding the three per quarter and five per year 
exchange limits set forth in the fund=s prospectus.  The dollar amounts of the registered 
representative=s trades, which ranged from approximately $50,000 to more than $2.2 million, 
averaged about $500,000.  During the period in which the arrangement was in place, the registered 
representative made a cumulative total of approximately $282.4 million worth of exchanges into and 
out of the fund.  In approximately March 2003, after the EIS vice president had left Evergreen, the 
ESC vice president responsible for Evergreen=s market timing monitoring operation told the 
registered representative that Evergreen would no longer permit him to exceed its exchange limits.  
The registered representative then ceased his market timing in the Small Company Growth Fund and 
closed out the account through which the activity had occurred.  During the period in which the 
registered representative timed the Small Company Growth Fund, Ennis signed several registration 
statements on the fund=s behalf, each of which incorporated the fund=s prospectus and the exchange 
limits contained therein and each of which was filed with the Commission by EIMCO or, at 
EIMCO=s direction, EIS.  At no point during the period in which the registered representative was 
making these exchanges did Ennis disclose the market timing arrangement to the fund=s board of 
trustees. 
 
Violations 
 
10. As a result of the above-described conduct, Ennis: 
 
a. willfully aided and abetted and caused EIMCO=s violations of Sections 206(1) 
and 206(2) of the Advisers Act.  Specifically, by entering into a market timing 
agreement that he knew or was reckless in not knowing would create an 
undisclosed conflict of interest between EIMCO, which benefited from the 
advisory fees generated by the timing activity as well as from the prospects the 
timing arrangement created for improving its relationship with the PCG, and 
the Small Company Growth Fund, which suffered the dilutive effect of the 
timing trades and the transaction costs related thereto, Ennis provided knowing 
and substantial assistance to EIMCO=s violations of this statute.  
 
b. willfully violated Section 34(b) of the Investment Company Act.  Specifically, 
by signing the Small Company Growth Fund=s registration statements, which 

 
 
5
incorporated the exchange limits, Ennis made a materially misleading 
statement in a document filed with the Commission.  
 
c. willfully aided and abetted and caused Wachovia Securities= violation of 
Section 17(d) of the Investment Company Act and Rule 17d-1 thereunder.  
Specifically, by granting Wachovia Securities= market timing request, Ennis 
enabled Wachovia Securities, which, by virtue of its common control with 
EIMCO, was affiliated with the Small Company Growth Fund, to enter into a 
joint arrangement with that fund without first obtaining an exemptive order 
from the Commission with respect thereto.  Ennis thus provided knowing and 
substantial assistance to Wachovia Securities= violation of this statute and rule. 
 
Undertakings 
 
11. Respondent undertakes to cooperate fully with the Commission in any and all 
investigations, litigations or other proceedings brought by the Commission relating to or arising from 
the matters described in the Order, and agrees: 
 
a. To comply with any and all reasonable requests by the Commission=s staff for 
documents or other information; 
 
b. To be interviewed at such times as the Commission=s staff reasonably may 
direct; 
 
c. To appear and testify in such investigations, depositions, hearings or trials as 
the Commission=s staff reasonably may direct; and 
 
d. That in connection with any (i) testimony of Respondent to be conducted by 
testimony session, deposition, hearing or trial or (ii) requests for documents or 
other information, that any notice or subpoena for such may be addressed to 
Respondent=s counsel, and be served by mail or facsimile. 
 
IV. 
 
On the basis of the foregoing, Respondent hereby consents to the entry of an Order by the 
Commission imposing the following: 
 
A. Pursuant to Section 203(k) of the Advisers Act and Section 9(f) of the Investment 
Company Act, that Respondent Ennis cease and desist from committing or causing any violations and 
any future violations of Sections 206(1) and 206(2) of the Advisers Act and from committing or 
causing any violations and any future violations of Sections 17(d) and 34(b) of the Investment 
Company Act and Rule 17d-1 thereunder. 
 

 
 
6
B. Pursuant to Sections 15(b)(6) and 17A(c)(4)(C) of the Exchange Act, Section 203(f) of 
the Advisers Act and Section 9(b) of the Investment Company Act, that Respondent Ennis be, and 
hereby is barred from association with any broker, dealer, transfer agent, or investment adviser, and is 
prohibited from serving or acting as an employee, officer, director, member of an advisory board, 
investment adviser or depositor of, or principal underwriter for, a registered investment company or 
affiliated person of such investment adviser, depositor, or principal underwriter, with a right to 
reapply for association after one (1) year from the date of the Order to the appropriate self-regulatory 
organization, or if there is none, to the Commission.   
 
C. Any reapplication for association by Ennis will be subject to the applicable laws and 
regulations governing the reentry process, and reentry may be conditioned upon a number of factors, 
including, but not limited to, the satisfaction of any or all of the following:  (a) any disgorgement 
ordered against Ennis, whether or not the Commission has fully or partially waived payment of such 
disgorgement; (b) any arbitration award related to the conduct that served as the basis for the 
Commission order; (c) any self-regulatory organization arbitration award to a customer, whether or 
not related to the conduct that served as the basis for the Commission order; and (d) any restitution 
order by a self-regulatory organization, whether or not related to the conduct that served as the basis 
for the Commission order. 
 
D. Within ten days of the entry of this Order, Ennis shall pay a civil penalty in the 
amount  
of $150,000 and disgorgement in the amount of $1.  Such payments shall be:  (A) made by United 
States postal money order, certified check, bank cashier=s check or bank money order; (B) made 
payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of 
Financial Management, Securities and Exchange Commission, Operations Center, 6432 General 
Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies 
William M. Ennis as a Respondent in these proceedings and that sets forth the file number of these 
proceedings.  A copy of this cover letter and money order or check shall be sent to David P. Bergers, 
Regional Director, Securities and Exchange Commission, 33 Arch Street, 23
rd
 Floor, Boston, 
Massachusetts, 02110.  The disgorgement and civil penalty payments referred to above shall be 
added to the Fair Fund established pursuant to Paragraph IV.G.2. of the Order Instituting 
Administrative and Cease-and-Desist Proceedings pursuant to Sections 15(b)(4), 17A(c)(3) and 21C 
of the Securities Exchange Act of 1934, Sections 203(e) and 203(k) of the Investment Advisers Act 
of 1940, and Sections 9(b) and 9(f) of the Investment Company Act of 1940, Making Findings, and 
Imposing Remedial Sanctions and a Cease-and-Desist Order against Evergreen Investment 
Management Company, LLC, Evergreen Investment Services, Inc., Evergreen Service Company, 
LLC, and Wachovia Securities, LLC.  Regardless of whether any distribution is made from such Fair 
Fund, amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as 
penalties paid to the government for all purposes, including all tax purposes. To preserve the 
deterrent effect of the civil penalty, Respondent agrees that he shall not, after offset or reduction in 
any Related Investor Action based on Respondent=s payment of disgorgement in this action, further 
benefit by offset or reduction of any part of Respondent=s payment of a civil penalty in this action 
("Penalty Offset").  If the court in any Related Investor Action grants such Penalty Offset, 
Respondent agrees that he shall, within 30 days after entry of a final order granting the Penalty 

 
 
7
Offset, notify the Commission's counsel in this action and pay the amount of the Penalty Offset to the 
United States Treasury or to a Fair Fund, as the Commission directs.  Such a payment shall not be 
deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
imposed in this proceeding.  For purposes of this paragraph, a "Related Investor Action" means a 
private damages action brought against Respondent by or on behalf of one or more investors based on 
substantially the same facts as alleged in the Order instituted by the Commission in this proceeding. 
 
By the Commission. 
 
 
Nancy M. Morris 
Secretary
OCR text (34,019c · tika · 95% conf) 
UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No.  56464 / September 19, 2007 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No.  2649 / September 19, 2007 
 
INVESTMENT COMPANY ACT OF 1940 
Release No. 27974 / September 19, 2007 
 
ADMINISTRATIVE PROCEEDING 
File No.  3-12806 
  
 
In the Matter of 
 
 WILLIAM M. ENNIS, 

Respondent. 
 
 
 
 

 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-AND-
DESIST ORDER PURSUANT TO SECTIONS 
15(b)(6) and 17A(c)(4)(C) OF THE SECURITIES 
EXCHANGE ACT OF 1934, SECTIONS 203(f) 
AND 203(k) OF THE INVESTMENT ADVISERS 
ACT OF 1940 AND SECTIONS 9(b) AND 9(f) OF 
THE INVESTMENT COMPANY ACT OF 1940 

 
I. 

 
The Securities and Exchange Commission (ACommission@) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 
instituted pursuant to Sections 15(b)(6) and 17A(c)(4)(C) of the Securities Exchange Act of 1934 
(AExchange Act@), Sections 203(f) and 203(k) of the Investment Advisers Act of 1940 (AAdvisers 
Act@) and Sections 9(b) and 9(f) of the Investment Company Act of 1940 (AInvestment Company 
Act@) against William M. Ennis (ARespondent@ or AEnnis@). 

 
II. 

 
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of 

Settlement (the AOffer@), which the Commission has determined to accept.  Solely for the purpose of 
these proceedings and any other proceedings brought by or on behalf of the Commission, or to which 
the Commission is a party, and without admitting or denying the findings herein, except as to the 
Commission=s jurisdiction over him and the subject matter of these proceedings, which are admitted, 
Respondent consents to the entry of this Order Instituting Administrative and Cease-and-Desist 
Proceedings, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order 



 
 2

Pursuant to Sections 15(b)(6) and 17A(c)(4)(C) of the Securities Exchange Act of 1934, Sections 
203(f) and 203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the 
Investment Company Act of 1940 (AOrder@), as set forth below.   

 
III. 

 
On the basis of this Order and Respondent=s Offer, the Commission finds1 that: 

 
Summary 

 
1. This is a proceeding against Ennis, the former president of the Evergreen Investment 

Company, Inc. (AEIC@), the corporate parent of Evergreen Investment Management Company, LLC 
(AEIMCO@), the Boston-based registered investment adviser for the Evergreen fund family, 
Evergreen Investment Services, Inc. (AEIS@), EIMCO=s affiliated registered broker-dealer, and 
Evergreen Service Company, LLC (AESC@), EIMCO’s affiliated transfer agent (collectively, 
AEvergreen@), based on his involvement in a market timing agreement that permitted a registered 
representative to make, on behalf of certain of his customers, frequent trades in the Evergreen Small 
Company Growth Fund (now known as the Mid Cap Growth Fund) in excess of the exchange limits 
set forth in the fund=s prospectus.   
 

2. 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 fund=s 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. 
 

3. In January 2000, Ennis, then the senior vice president of EIC, agreed to permit 
a registered representative to market time one or more Evergreen funds on behalf of certain of his 
customers even though he knew that Evergreen had an anti-market timing policy, consistent with 
which each Evergreen fund prospectus limited exchanges to three per calendar quarter and five per 
calendar year, and even though he knew that market timing could disrupt fund management and harm 
fund performance.  The registered representative subsequently made approximately 386 exchanges 
into and out of the Evergreen Small Company Growth Fund from approximately January 2001 
through March 2003.  This timing activity harmed the fund.  From January 2001 through March 
2003, Ennis signed several Small Company Growth Fund registration statements, each of which 
incorporated the fund=s prospectus and the exchange limits contained therein.  At no point during the 
period in which the registered representative was making these exchanges did Ennis disclose the 
market timing arrangement to the fund=s board of trustees. 

                                                 
1  The findings herein are made pursuant to Respondent=s Offer of Settlement and are not binding on 
any other person or entity in this or any other proceeding. 



 
 3

 
Respondent 

 
4. William M. Ennis was employed at Evergreen from 1994 to June 2003, when he 

resigned.  In December 1996, Ennis was named a senior vice president of EIC and, in April 2000, 
Ennis became EIC=s president.  During the relevant period, Ennis served as a director of and control 
person for EIMCO, he supervised the president of EIS, he was the president of the Evergreen Equity 
Trust, a registered investment company of which the Small Company Growth Fund was a series, and 
he functioned as the chief executive officer of the Evergreen mutual fund complex.  Ennis, age 46, is 
a resident of Charleston, South Carolina. 
 

Related Entities 
 

5. EIC is a wholly owned holding company subsidiary of Wachovia Corporation, a 
Charlotte, North Carolina based company whose common stock is registered with the Commission 
and principally trades on the New York Stock Exchange.  EIC owns EIMCO, EIS, and ESC 
(collectively, AEvergreen@).   The Evergreen fund family is one of the 20 largest fund groups in the 
nation.  As of March 31, 2007, EIMCO had more than $312 billion in assets under management.   
 

6. Wachovia Securities, LLC is a Richmond-based registered broker-dealer that is a 
majority-owned subsidiary of Wachovia Corporation. 
 

Facts 
 

The Market Timing Agreement 
 

7. In January 2000, Evergreen had in place an Aanti-market timing@ policy through which 
it sought to eliminate market timing in the Evergreen funds.  Consistent with this policy, each 
Evergreen fund prospectus contained a provision stating that: AExchanges are limited to three per 
calendar quarter, but in no event more than five per calendar year.@  In January 2000, Ennis was 
familiar with the exchange limit provision set forth in each Evergreen fund prospectus, he understood 
that a market timer might make more than three exchanges per quarter and five per year, and he was 
aware that market timing could impose trading costs on a fund, disrupt fund management and harm 
fund performance.  
 

8. In January 2000, the retail division of Wachovia Securities, then operating under the 
name First Union Securities, Inc. (which was under common control with Evergreen at the time), was 
the number one distributor of Evergreen funds, accounting for about $2 billion of the funds= 
approximately $3 billion in total annual sales.  In early January 2000, Wachovia Securities= Private 
Client Group (APCG@), the firm=s non-bank branch based division, notified an EIS vice president that 
it was attempting to recruit a top-producing registered representative, who was seeking permission to 
market time one or more Evergreen funds on behalf of certain of his customers.  Convinced that it 
would otherwise be unable to hire the recruit, the PCG asked the EIS vice president if Evergreen 
would be willing to accommodate the recruit=s market timing activity.  After EIS= president and 



 
 4

EIMCO=s chief investment officer for equities denied it, the EIS vice president, at the request of the 
PCG=s president, presented the timing request to Ennis, who was trying at that time to improve 
Evergreen=s sales and distribution through the PCG channel.  Despite being told by the EIS vice 
president that both the EIS president and EIMCO=s chief investment officer for Equities had rejected 
it, Ennis granted the PCG=s timing request.  Noting that the PCG might not land the recruit, Ennis 
ordered that this arrangement be kept confidential, specifically instructing that the EIS president not 
be informed of it.  
 

9. In approximately January 2001, the registered representative joined Wachovia 
Securities and began trading in the Small Company Growth Fund on behalf of certain of his 
customers.  From that time through March 2003, the registered representative made approximately 
386 exchanges into and out of the fund, thus greatly exceeding the three per quarter and five per year 
exchange limits set forth in the fund=s prospectus.  The dollar amounts of the registered 
representative=s trades, which ranged from approximately $50,000 to more than $2.2 million, 
averaged about $500,000.  During the period in which the arrangement was in place, the registered 
representative made a cumulative total of approximately $282.4 million worth of exchanges into and 
out of the fund.  In approximately March 2003, after the EIS vice president had left Evergreen, the 
ESC vice president responsible for Evergreen=s market timing monitoring operation told the 
registered representative that Evergreen would no longer permit him to exceed its exchange limits.  
The registered representative then ceased his market timing in the Small Company Growth Fund and 
closed out the account through which the activity had occurred.  During the period in which the 
registered representative timed the Small Company Growth Fund, Ennis signed several registration 
statements on the fund=s behalf, each of which incorporated the fund=s prospectus and the exchange 
limits contained therein and each of which was filed with the Commission by EIMCO or, at 
EIMCO=s direction, EIS.  At no point during the period in which the registered representative was 
making these exchanges did Ennis disclose the market timing arrangement to the fund=s board of 
trustees. 
 

Violations 
 

10. As a result of the above-described conduct, Ennis: 
 

a. willfully aided and abetted and caused EIMCO=s violations of Sections 206(1) 
and 206(2) of the Advisers Act.  Specifically, by entering into a market timing 
agreement that he knew or was reckless in not knowing would create an 
undisclosed conflict of interest between EIMCO, which benefited from the 
advisory fees generated by the timing activity as well as from the prospects the 
timing arrangement created for improving its relationship with the PCG, and 
the Small Company Growth Fund, which suffered the dilutive effect of the 
timing trades and the transaction costs related thereto, Ennis provided knowing 
and substantial assistance to EIMCO=s violations of this statute.  

 
b. willfully violated Section 34(b) of the Investment Company Act.  Specifically, 

by signing the Small Company Growth Fund=s registration statements, which 



 
 5

incorporated the exchange limits, Ennis made a materially misleading 
statement in a document filed with the Commission.  

 
c. willfully aided and abetted and caused Wachovia Securities= violation of 

Section 17(d) of the Investment Company Act and Rule 17d-1 thereunder.  
Specifically, by granting Wachovia Securities= market timing request, Ennis 
enabled Wachovia Securities, which, by virtue of its common control with 
EIMCO, was affiliated with the Small Company Growth Fund, to enter into a 
joint arrangement with that fund without first obtaining an exemptive order 
from the Commission with respect thereto.  Ennis thus provided knowing and 
substantial assistance to Wachovia Securities= violation of this statute and rule. 

 
Undertakings 

 
11. Respondent undertakes to cooperate fully with the Commission in any and all 

investigations, litigations or other proceedings brought by the Commission relating to or arising from 
the matters described in the Order, and agrees: 
 

a. To comply with any and all reasonable requests by the Commission=s staff for 
documents or other information; 

 
b. To be interviewed at such times as the Commission=s staff reasonably may 

direct; 
 

c. To appear and testify in such investigations, depositions, hearings or trials as 
the Commission=s staff reasonably may direct; and 

 
d. That in connection with any (i) testimony of Respondent to be conducted by 

testimony session, deposition, hearing or trial or (ii) requests for documents or 
other information, that any notice or subpoena for such may be addressed to 
Respondent=s counsel, and be served by mail or facsimile. 

 
IV. 

 
On the basis of the foregoing, Respondent hereby consents to the entry of an Order by the 

Commission imposing the following: 
 

A. Pursuant to Section 203(k) of the Advisers Act and Section 9(f) of the Investment 
Company Act, that Respondent Ennis cease and desist from committing or causing any violations and 
any future violations of Sections 206(1) and 206(2) of the Advisers Act and from committing or 
causing any violations and any future violations of Sections 17(d) and 34(b) of the Investment 
Company Act and Rule 17d-1 thereunder. 
 



 
 6

B. Pursuant to Sections 15(b)(6) and 17A(c)(4)(C) of the Exchange Act, Section 203(f) of 
the Advisers Act and Section 9(b) of the Investment Company Act, that Respondent Ennis be, and 
hereby is barred from association with any broker, dealer, transfer agent, or investment adviser, and is 
prohibited from serving or acting as an employee, officer, director, member of an advisory board, 
investment adviser or depositor of, or principal underwriter for, a registered investment company or 
affiliated person of such investment adviser, depositor, or principal underwriter, with a right to 
reapply for association after one (1) year from the date of the Order to the appropriate self-regulatory 
organization, or if there is none, to the Commission.   
 

C. Any reapplication for association by Ennis will be subject to the applicable laws and 
regulations governing the reentry process, and reentry may be conditioned upon a number of factors, 
including, but not limited to, the satisfaction of any or all of the following:  (a) any disgorgement 
ordered against Ennis, whether or not the Commission has fully or partially waived payment of such 
disgorgement; (b) any arbitration award related to the conduct that served as the basis for the 
Commission order; (c) any self-regulatory organization arbitration award to a customer, whether or 
not related to the conduct that served as the basis for the Commission order; and (d) any restitution 
order by a self-regulatory organization, whether or not related to the conduct that served as the basis 
for the Commission order. 
 

D. Within ten days of the entry of this Order, Ennis shall pay a civil penalty in the 
amount  

of $150,000 and disgorgement in the amount of $1.  Such payments shall be:  (A) made by United 
States postal money order, certified check, bank cashier=s check or bank money order; (B) made 
payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Office of 
Financial Management, Securities and Exchange Commission, Operations Center, 6432 General 
Green Way, Stop 0-3, Alexandria, VA 22312; and (D) submitted under cover letter that identifies 
William M. Ennis as a Respondent in these proceedings and that sets forth the file number of these 
proceedings.  A copy of this cover letter and money order or check shall be sent to David P. Bergers, 
Regional Director, Securities and Exchange Commission, 33 Arch Street, 23rd Floor, Boston, 
Massachusetts, 02110.  The disgorgement and civil penalty payments referred to above shall be 
added to the Fair Fund established pursuant to Paragraph IV.G.2. of the Order Instituting 
Administrative and Cease-and-Desist Proceedings pursuant to Sections 15(b)(4), 17A(c)(3) and 21C 
of the Securities Exchange Act of 1934, Sections 203(e) and 203(k) of the Investment Advisers Act 
of 1940, and Sections 9(b) and 9(f) of the Investment Company Act of 1940, Making Findings, and 
Imposing Remedial Sanctions and a Cease-and-Desist Order against Evergreen Investment 
Management Company, LLC, Evergreen Investment Services, Inc., Evergreen Service Company, 
LLC, and Wachovia Securities, LLC.  Regardless of whether any distribution is made from such Fair 
Fund, amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as 
penalties paid to the government for all purposes, including all tax purposes. To preserve the 
deterrent effect of the civil penalty, Respondent agrees that he shall not, after offset or reduction in 
any Related Investor Action based on Respondent=s payment of disgorgement in this action, further 
benefit by offset or reduction of any part of Respondent=s payment of a civil penalty in this action 
("Penalty Offset").  If the court in any Related Investor Action grants such Penalty Offset, 
Respondent agrees that he shall, within 30 days after entry of a final order granting the Penalty 



 
 7

Offset, notify the Commission's counsel in this action and pay the amount of the Penalty Offset to the 
United States Treasury or to a Fair Fund, as the Commission directs.  Such a payment shall not be 
deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
imposed in this proceeding.  For purposes of this paragraph, a "Related Investor Action" means a 
private damages action brought against Respondent by or on behalf of one or more investors based on 
substantially the same facts as alleged in the Order instituted by the Commission in this proceeding. 
 

By the Commission. 
 
 

Nancy M. Morris 
Secretary 

 


	 
	 UNITED STATES OF AMERICA 
	 
	In the Matter of 
	 
	 WILLIAM M. ENNIS, 
	 
	Respondent. 



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    /SVE <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>
    /ENU (Use these settings to create Adobe PDF documents for quality printing on desktop printers and proofers.  Created PDF documents can be opened with Acrobat and Adobe Reader 5.0 and later.)
  >>
  /Namespace [
    (Adobe)
    (Common)
    (1.0)
  ]
  /OtherNamespaces [
    <<
      /AsReaderSpreads false
      /CropImagesToFrames true
      /ErrorControl /WarnAndContinue
      /FlattenerIgnoreSpreadOverrides false
      /IncludeGuidesGrids false
      /IncludeNonPrinting false
      /IncludeSlug false
      /Namespace [
        (Adobe)
        (InDesign)
        (4.0)
      ]
      /OmitPlacedBitmaps false
      /OmitPlacedEPS false
      /OmitPlacedPDF false
      /SimulateOverprint /Legacy
    >>
    <<
      /AddBleedMarks false
      /AddColorBars false
      /AddCropMarks false
      /AddPageInfo false
      /AddRegMarks false
      /ConvertColors /NoConversion
      /DestinationProfileName ()
      /DestinationProfileSelector /NA
      /Downsample16BitImages true
      /FlattenerPreset <<
        /PresetSelector /MediumResolution
      >>
      /FormElements false
      /GenerateStructure true
      /IncludeBookmarks false
      /IncludeHyperlinks false
      /IncludeInteractive false
      /IncludeLayers false
      /IncludeProfiles true
      /MultimediaHandling /UseObjectSettings
      /Namespace [
        (Adobe)
        (CreativeSuite)
        (2.0)
      ]
      /PDFXOutputIntentProfileSelector /NA
      /PreserveEditing true
      /UntaggedCMYKHandling /LeaveUntagged
      /UntaggedRGBHandling /LeaveUntagged
      /UseDocumentBleed false
    >>
  ]
>> setdistillerparams
<<
  /HWResolution [2400 2400]
  /PageSize [612.000 792.000]
>> setpagedevice