In the Matter of : MAKING FINDINGS, AND IMPOSING

UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 8795 / May 2, 2007 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 55693 / May 2, 2007 
 
INVESTMENT COMPANY ACT OF 1940 
Release No. 27816 / May 2, 2007 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-12625 
     
                                                :            ORDER            INSTITUTING            ADMINISTRATIVE            
                                                :            AND            CEASE-AND-DESIST            PROCEEDINGS,                        
In the Matter of  : MAKING FINDINGS, AND IMPOSING 
                                                :            REMEDIAL            SANCTIONS            AND            A            CEASE-                        
CHARLES A. SACCO, : AND-DESIST ORDER PURSUANT TO 
                                                :            SECTION            8A            OF            THE            SECURITIES            ACT            OF            
            Respondent.                        :            1933,            SECTIONS 15(b) AND 21C OF THE  
                                                :            SECURITIES            EXCHANGE            ACT            OF            1934            AND            
                                                :            SECTION            9(b)            OF            THE            INVESTMENT                                    
    : COMPANY ACT OF 1940      
 
 
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate 
and in the public interest that public administrative and cease-and-desist proceedings be, 
and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 
(“Securities Act”), Sections 15(b) and 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) and Section 9(b) of the Investment Company Act of 1940 (“Investment 
Company Act”) against Charles A. Sacco (“Sacco” or “Respondent”). 
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted 
an Offer of Settlement (the “Offer”), 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 Pursuant to 
Section 8A of the Securities Act of 1933, Sections 15(b) and 21C of the Securities 
Exchange Act of 1934 and Section 9(b) of the Investment Company Act of 1940 
(“Order”), 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 Sacco, a former registered representative at A.G. 
Edwards & Sons, Inc. (“AG Edwards”), a registered broker-dealer.  Between May 2002 
and September 2003, Sacco used deceptive means to market time mutual fund shares on 
behalf of two large hedge fund customers.
2
  By virtue of his conduct, Sacco violated the 
antifraud provisions of the Securities Act and the Exchange Act. 
 
Respondent
 
2. Sacco, age 29, is a resident of Medford, Massachusetts.  Between December 2001 
and October 2003, Sacco was employed as a registered representative, referred to at AG 
Edwards as a “financial consultant” (“FC”), in the Boston Back Bay, Massachusetts 
branch office of AG Edwards.  At all relevant times, Sacco held the following licenses 
with the National Association of Securities Dealers, Inc. (“NASD”):  General Securities 
Representative (Series 7); Uniform Securities Agent State Law (Series 63); and 
Registered Investment Adviser (Series 65). 
 
Other Relevant Entity
 
3. AG Edwards is a Delaware corporation with headquarters located in St. Louis, 
Missouri that has been registered with the Commission as a broker-dealer pursuant to 
Section 15 of the Exchange Act since 1967.  AG Edwards has approximately 730 offices 
staffed by approximately 6,824 registered FCs that provide retail brokerage services 
throughout the United States, Switzerland and the United Kingdom.  AG Edwards is the 
principal operating subsidiary of A.G. Edwards, Inc., a Delaware corporation whose 
stock is traded on the NYSE under the symbol AGE. 
 
                                                
 
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. 
2
 “Market timing” refers to (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, disrupt the management of the mutual fund’s 
investment portfolio or cause the targeted mutual fund to incur costs borne by other shareholders to 
accommodate frequent buying and selling of shares by the market timer. 
 
2

Background
 
4. From approximately May 2002 to September 2003, Sacco engaged in an illegal 
market timing scheme on behalf of two large hedge fund customers (“Hedge Fund A” 
and “Hedge Fund B,” collectively, “hedge fund customers”).  Sacco defrauded more than 
100 mutual funds from at least 25 different mutual fund companies and their shareholders 
by engaging in a series of deceptive practices designed to conceal his identity and the 
identities of his hedge fund customers from the mutual fund companies in order to 
circumvent restrictions that the mutual fund companies imposed on market timing.   
 
Sacco’s Trading Practices
 
5. Starting in approximately May 2002, based on a referral from a former colleague 
at another broker-dealer, Sacco began opening brokerage accounts for his hedge fund 
customers.  Between May 2002 and September 2003, Sacco opened 129 accounts for 
Hedge Fund A and 13 accounts for Hedge Fund B.  At all relevant times, Sacco knew 
that Hedge Fund A and Hedge Fund B planned to use their accounts at AG Edwards to 
place market timing trades.        
 
6. Most of the hedge fund customers’ accounts were fee-based accounts in AG 
Edwards’ Fund Navigator program, later called the Preferred Fund Advisor program.  
Through these accounts, the hedge fund customers did not pay commissions for each 
transaction placed on their behalf.  Instead, the customers paid Sacco and AG Edwards 
quarterly fees ranging from 1% to 1.5% of the total assets in the account.  During the 
relevant time period, Sacco received $215,892.52 in compensation for trading on behalf 
of his hedge fund customers. 
 
7. Between May 2002 and September 2003, Sacco placed more than 35,000 trades 
on behalf of his hedge fund customers.  Most of these trades were in mutual funds that 
prohibited or strictly limited the number and frequency of trades in an effort to prevent 
market timing. 
 
8. Sacco regularly communicated with his hedge fund customers by telephone and e-
mail concerning specific trades, the flow of assets into and out of their accounts and the 
opening of new accounts.     
 
9. Many of the mutual fund companies screened for market timing or excessive 
short-term trading by reviewing the FC identification numbers and account numbers 
associated with trades over a certain dollar amount.  Typically, if a mutual fund company 
concluded that a particular trade placed by one of AG Edwards’ FCs violated its 
exchange limitations or restrictions against market timing, it would attempt to prevent 
additional trades in that mutual fund or mutual fund family by contacting AG Edwards 
and/or the registered FC who placed the trade. 
 
10. Over time, Sacco and AG Edwards received at least 180 telephone calls, letters, e-
mails and canceled trade notices (collectively “restriction notices”) from mutual fund 
 
3

companies objecting to Sacco’s placement of market timing trades on behalf of his hedge 
fund customers.  These restriction notices informed Sacco and AG Edwards that the fund 
companies had rejected particular trades or restricted Sacco and his hedge fund customers 
from placing further market timing trades.         
 
11. The majority of the written restriction notices were sent to the mutual fund order 
room at AG Edwards’ headquarters in St. Louis, Missouri.  As the restriction notices 
came in, employees in the order room updated AG Edwards’ trading data and then sent 
copies of the restriction notices to Sacco and the Boston Back Bay branch of AG 
Edwards.     
 
12. After receiving copies of the restriction notices, Sacco repeatedly ignored the 
mutual fund companies’ requests to cease trading and continued market timing on behalf 
of his hedge fund customers.  In order to avoid further detection by the mutual fund 
companies, Sacco engaged in a series of deceptive acts and practices to conceal his 
continuing market timing activity from mutual fund companies.   
 
13. For example, Sacco opened 142 separate accounts for his two hedge fund 
customers in the names of multiple entities affiliated with Hedge Fund A and Hedge 
Fund B in order to avoid further detection of the customers’ market timing activity.  
Sacco also transferred assets between the related accounts after he received restriction 
notices.   
 
14. In addition, Sacco placed market timing trades on behalf of his hedge fund 
customers using several different FC identification numbers.   
 
15. AG Edwards issued each of its registered FCs one unique identification number 
through which to place trades on behalf of customers.  However, FCs could obtain 
additional FC identification numbers with which they could place trades by entering into 
a “split” with one or more other FCs.  A legitimate reason to request a new split FC 
number was to share commissions and fees with one or more additional FCs who 
serviced the same customer.  In contrast, an illegitimate reason to obtain additional split 
FC numbers was to continue market timing mutual funds that previously restricted an FC 
from trading under other FC numbers or split FC numbers.  Because many mutual fund 
companies restricted further trading by FC numbers rather than by FC names, an FC 
could evade restrictions by obtaining and trading under a new FC number. 
 
16. Between May 2002 and September 2003, Sacco requested and obtained at least 
nine different split FC numbers with which to trade on behalf of his hedge fund 
customers.  Most of the splits were with FCs and other individuals who did not do 
anything to service Sacco’s hedge fund customers and who received only 1% of the 
commissions or fees for trades executed under the split FC numbers. 
 
17. By using these deceptive acts and practices, Sacco was able to disguise his 
identity and the identities of his hedge fund customers and thus, gain access to mutual 
funds that previously restricted him and his hedge fund customers from trading.  
 
4

Violations
 
18. As a result of the conduct described above, Sacco willfully violated Section 17(a) 
of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, 
which prohibit fraudulent conduct in the offer and sale of securities and in connection 
with the purchase, offer, or sale of securities. 
 
Disgorgement and Civil Penalties
 
19. Respondent Sacco has submitted a sworn Statement of Financial Condition dated 
June 5, 2006 and other evidence and has asserted his inability to pay the entire amount of 
disgorgement plus prejudgment interest and a civil penalty. 
 
Undertakings
 
 In determining whether to accept Respondent Sacco’s Offer, the Commission has 
considered the following undertakings by Sacco: 
 
20. Respondent Sacco shall cooperate fully with the Commission in any and all 
investigations, litigations or other proceedings relating to or arising from the matters 
described in this Order.  In connection with such cooperation, Respondent Sacco has 
undertaken: 
 
 a. To produce, without service of a notice or subpoena, any and all 
 documents and other information reasonably requested by the Commission’s 
            staff;            
 
 b. To be interviewed by the Commission’s staff at such times as the staff 
 reasonably may request and to appear and testify truthfully and completely 
 without service of a notice or subpoena in such investigations, litigations, 
 hearings or trials as may be requested by the Commission’s staff; and  
  
 c. That in connection with any testimony of Respondent Sacco to be 
 conducted at deposition, hearing or trial pursuant to a notice or subpoena, 
            Respondent            Sacco:            
   
  i. Agrees that any such notice or subpoena for his appearance and  
  testimony may be served by regular mail on his counsel, Daniel   
  Rabinovitz, Esq., Michaels & Ward, LLP, 12 Post Office Square, Boston,  
  MA 02109; and  
 
  ii. Agrees that any such notice or subpoena for his appearance and  
  testimony in an action pending in a United States District Court may be  
  served, and may require testimony, beyond the territorial limits imposed  
  by the Federal Rules of Civil Procedure. 
 
 
5

IV. 
 
 In view of the foregoing, the Commission deems it appropriate, and in the public 
interest, to impose the sanctions agreed to in Respondent Sacco’s Offer. 
 
 Accordingly, pursuant to Section 8A of the Securities Act, Sections 15(b) and 
21C of the Exchange Act and Section 9(b) of the Investment Company Act, it is hereby 
ORDERED that: 
 
A. Respondent Sacco cease and desist from committing or causing any violations 
and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the 
Exchange Act and Rule 10b-5 thereunder. 
 
B. Respondent Sacco be, and hereby is barred from association with any broker or 
dealer, 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 the right to reapply for association after two (2) years to the 
appropriate self-regulatory organization, or if there is none, to the Commission. 
 
C. Any reapplication for association by Respondent Sacco 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 the Respondent, 
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. Respondent Sacco shall be ordered to pay disgorgement of $215,892.52 plus 
prejudgment interest of $56,978.70 for a total payment of $272,871.22, but based upon 
Respondent Sacco’s sworn representations in his Statement of Financial Condition dated 
June 5, 2006 and other documents submitted to the Commission, the payment of all but 
$15,000 of the disgorgement and prejudgment interest is waived and the Commission is 
not imposing a penalty against Respondent Sacco.  Respondent Sacco shall pay 
disgorgement in the amount of $15,000 pursuant to the payment plan outlined below. 
 
E. Respondent Sacco shall pay $15,000 in 12 installments of $1,250.00 over a 36 
month period to the United States Treasury.  Sacco’s first payment of $1,250.00 shall be 
due thirty days after the date of entry of this Order and his remaining 11 payments shall 
be post-marked no later than the 30
th
 of June, September, December and March of each 
year until December 30, 2009.  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 
 
6

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 Charles Sacco as a Respondent in these proceedings and 
the file number of these proceedings, a copy of which cover letter and money order or 
check shall be sent to Merri Jo Gillette, Regional Director, Midwest Regional Office, 
Securities and Exchange Commission, 175 West Jackson Boulevard, Suite 900, Chicago, 
IL 60604. 
 
F. Respondent Sacco agrees that if the full amount of any payment described above 
is not made within ten (10) days following the date the payment is required by this Order, 
the entire amount of disgorgement, prejudgment interest and civil penalties, plus post 
judgment interest minus payments made, if any, is due and payable immediately without 
further application. 
 
G. The Division of Enforcement may, at any time following the entry of this Order, 
petition the Commission to:  (1) reopen this matter to consider whether Respondent 
Sacco provided accurate and complete financial information at the time such 
representations were made; and (2) seek an order directing payment of disgorgement and 
prejudgment interest and the maximum civil penalty allowable under the law.  No other 
issue shall be considered in connection with this petition other than whether the financial 
information provided by Respondent Sacco was fraudulent, misleading, inaccurate or 
incomplete in any material respect.  Respondent Sacco may not, by way of defense to any 
such petition:  (1) contest the findings in this Order; (2) assert that payment of 
disgorgement, interest and a penalty should not be ordered; (3) contest the amount of 
disgorgement and interest to be ordered or the imposition of the maximum penalty 
allowable under the law; or (4) assert any defense to liability or remedy, including, but 
not limited to, any statute of limitations defense. 
  
 
 By the Commission. 
 
 
 
      Nancy M. Morris 
                                                                        Secretary            
 
 
7

UNITED STATES OF AMERICA 
Before the 

SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 8795 / May 2, 2007 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 55693 / May 2, 2007 
 
INVESTMENT COMPANY ACT OF 1940 
Release No. 27816 / May 2, 2007 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-12625 
     
    : ORDER INSTITUTING ADMINISTRATIVE 
    : AND CEASE-AND-DESIST PROCEEDINGS,  
In the Matter of  : MAKING FINDINGS, AND IMPOSING 
    : REMEDIAL SANCTIONS AND A CEASE-  
CHARLES A. SACCO, : AND-DESIST ORDER PURSUANT TO 
    : SECTION 8A OF THE SECURITIES ACT OF 
 Respondent.  : 1933, SECTIONS 15(b) AND 21C OF THE  
    : SECURITIES EXCHANGE ACT OF 1934 AND 
    : SECTION 9(b) OF THE INVESTMENT   
    : COMPANY ACT OF 1940     
 
 

I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate 
and in the public interest that public administrative and cease-and-desist proceedings be, 
and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 
(“Securities Act”), Sections 15(b) and 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) and Section 9(b) of the Investment Company Act of 1940 (“Investment 
Company Act”) against Charles A. Sacco (“Sacco” or “Respondent”). 
 

II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted 
an Offer of Settlement (the “Offer”), 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 Pursuant to 
Section 8A of the Securities Act of 1933, Sections 15(b) and 21C of the Securities 
Exchange Act of 1934 and Section 9(b) of the Investment Company Act of 1940 
(“Order”), 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 Sacco, a former registered representative at A.G. 
Edwards & Sons, Inc. (“AG Edwards”), a registered broker-dealer.  Between May 2002 
and September 2003, Sacco used deceptive means to market time mutual fund shares on 
behalf of two large hedge fund customers.2  By virtue of his conduct, Sacco violated the 
antifraud provisions of the Securities Act and the Exchange Act. 
 

Respondent
 
2. Sacco, age 29, is a resident of Medford, Massachusetts.  Between December 2001 
and October 2003, Sacco was employed as a registered representative, referred to at AG 
Edwards as a “financial consultant” (“FC”), in the Boston Back Bay, Massachusetts 
branch office of AG Edwards.  At all relevant times, Sacco held the following licenses 
with the National Association of Securities Dealers, Inc. (“NASD”):  General Securities 
Representative (Series 7); Uniform Securities Agent State Law (Series 63); and 
Registered Investment Adviser (Series 65). 
 

Other Relevant Entity
 
3. AG Edwards is a Delaware corporation with headquarters located in St. Louis, 
Missouri that has been registered with the Commission as a broker-dealer pursuant to 
Section 15 of the Exchange Act since 1967.  AG Edwards has approximately 730 offices 
staffed by approximately 6,824 registered FCs that provide retail brokerage services 
throughout the United States, Switzerland and the United Kingdom.  AG Edwards is the 
principal operating subsidiary of A.G. Edwards, Inc., a Delaware corporation whose 
stock is traded on the NYSE under the symbol AGE. 
 

                                                 
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. 
2 “Market timing” refers to (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, disrupt the management of the mutual fund’s 
investment portfolio or cause the targeted mutual fund to incur costs borne by other shareholders to 
accommodate frequent buying and selling of shares by the market timer. 

 2



Background
 

4. From approximately May 2002 to September 2003, Sacco engaged in an illegal 
market timing scheme on behalf of two large hedge fund customers (“Hedge Fund A” 
and “Hedge Fund B,” collectively, “hedge fund customers”).  Sacco defrauded more than 
100 mutual funds from at least 25 different mutual fund companies and their shareholders 
by engaging in a series of deceptive practices designed to conceal his identity and the 
identities of his hedge fund customers from the mutual fund companies in order to 
circumvent restrictions that the mutual fund companies imposed on market timing.   
 

Sacco’s Trading Practices
 
5. Starting in approximately May 2002, based on a referral from a former colleague 
at another broker-dealer, Sacco began opening brokerage accounts for his hedge fund 
customers.  Between May 2002 and September 2003, Sacco opened 129 accounts for 
Hedge Fund A and 13 accounts for Hedge Fund B.  At all relevant times, Sacco knew 
that Hedge Fund A and Hedge Fund B planned to use their accounts at AG Edwards to 
place market timing trades.        
 
6. Most of the hedge fund customers’ accounts were fee-based accounts in AG 
Edwards’ Fund Navigator program, later called the Preferred Fund Advisor program.  
Through these accounts, the hedge fund customers did not pay commissions for each 
transaction placed on their behalf.  Instead, the customers paid Sacco and AG Edwards 
quarterly fees ranging from 1% to 1.5% of the total assets in the account.  During the 
relevant time period, Sacco received $215,892.52 in compensation for trading on behalf 
of his hedge fund customers. 
 
7. Between May 2002 and September 2003, Sacco placed more than 35,000 trades 
on behalf of his hedge fund customers.  Most of these trades were in mutual funds that 
prohibited or strictly limited the number and frequency of trades in an effort to prevent 
market timing. 
 
8. Sacco regularly communicated with his hedge fund customers by telephone and e-
mail concerning specific trades, the flow of assets into and out of their accounts and the 
opening of new accounts.     
 
9. Many of the mutual fund companies screened for market timing or excessive 
short-term trading by reviewing the FC identification numbers and account numbers 
associated with trades over a certain dollar amount.  Typically, if a mutual fund company 
concluded that a particular trade placed by one of AG Edwards’ FCs violated its 
exchange limitations or restrictions against market timing, it would attempt to prevent 
additional trades in that mutual fund or mutual fund family by contacting AG Edwards 
and/or the registered FC who placed the trade. 
 
10. Over time, Sacco and AG Edwards received at least 180 telephone calls, letters, e-
mails and canceled trade notices (collectively “restriction notices”) from mutual fund 

 3



companies objecting to Sacco’s placement of market timing trades on behalf of his hedge 
fund customers.  These restriction notices informed Sacco and AG Edwards that the fund 
companies had rejected particular trades or restricted Sacco and his hedge fund customers 
from placing further market timing trades.        
 
11. The majority of the written restriction notices were sent to the mutual fund order 
room at AG Edwards’ headquarters in St. Louis, Missouri.  As the restriction notices 
came in, employees in the order room updated AG Edwards’ trading data and then sent 
copies of the restriction notices to Sacco and the Boston Back Bay branch of AG 
Edwards.     
 
12. After receiving copies of the restriction notices, Sacco repeatedly ignored the 
mutual fund companies’ requests to cease trading and continued market timing on behalf 
of his hedge fund customers.  In order to avoid further detection by the mutual fund 
companies, Sacco engaged in a series of deceptive acts and practices to conceal his 
continuing market timing activity from mutual fund companies.   
 
13. For example, Sacco opened 142 separate accounts for his two hedge fund 
customers in the names of multiple entities affiliated with Hedge Fund A and Hedge 
Fund B in order to avoid further detection of the customers’ market timing activity.  
Sacco also transferred assets between the related accounts after he received restriction 
notices.   
 
14. In addition, Sacco placed market timing trades on behalf of his hedge fund 
customers using several different FC identification numbers.   
 
15. AG Edwards issued each of its registered FCs one unique identification number 
through which to place trades on behalf of customers.  However, FCs could obtain 
additional FC identification numbers with which they could place trades by entering into 
a “split” with one or more other FCs.  A legitimate reason to request a new split FC 
number was to share commissions and fees with one or more additional FCs who 
serviced the same customer.  In contrast, an illegitimate reason to obtain additional split 
FC numbers was to continue market timing mutual funds that previously restricted an FC 
from trading under other FC numbers or split FC numbers.  Because many mutual fund 
companies restricted further trading by FC numbers rather than by FC names, an FC 
could evade restrictions by obtaining and trading under a new FC number. 
 
16. Between May 2002 and September 2003, Sacco requested and obtained at least 
nine different split FC numbers with which to trade on behalf of his hedge fund 
customers.  Most of the splits were with FCs and other individuals who did not do 
anything to service Sacco’s hedge fund customers and who received only 1% of the 
commissions or fees for trades executed under the split FC numbers. 
 
17. By using these deceptive acts and practices, Sacco was able to disguise his 
identity and the identities of his hedge fund customers and thus, gain access to mutual 
funds that previously restricted him and his hedge fund customers from trading.  

 4



Violations
 
18. As a result of the conduct described above, Sacco willfully violated Section 17(a) 
of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, 
which prohibit fraudulent conduct in the offer and sale of securities and in connection 
with the purchase, offer, or sale of securities. 

 
Disgorgement and Civil Penalties

 
19. Respondent Sacco has submitted a sworn Statement of Financial Condition dated 
June 5, 2006 and other evidence and has asserted his inability to pay the entire amount of 
disgorgement plus prejudgment interest and a civil penalty. 
 

Undertakings
 

 In determining whether to accept Respondent Sacco’s Offer, the Commission has 
considered the following undertakings by Sacco: 
 
20. Respondent Sacco shall cooperate fully with the Commission in any and all 
investigations, litigations or other proceedings relating to or arising from the matters 
described in this Order.  In connection with such cooperation, Respondent Sacco has 
undertaken: 
 
 a. To produce, without service of a notice or subpoena, any and all 
 documents and other information reasonably requested by the Commission’s 
 staff; 
 
 b. To be interviewed by the Commission’s staff at such times as the staff 
 reasonably may request and to appear and testify truthfully and completely 
 without service of a notice or subpoena in such investigations, litigations, 
 hearings or trials as may be requested by the Commission’s staff; and  
  
 c. That in connection with any testimony of Respondent Sacco to be 
 conducted at deposition, hearing or trial pursuant to a notice or subpoena, 
 Respondent Sacco: 
   
  i. Agrees that any such notice or subpoena for his appearance and  
  testimony may be served by regular mail on his counsel, Daniel   
  Rabinovitz, Esq., Michaels & Ward, LLP, 12 Post Office Square, Boston,  
  MA 02109; and  
 
  ii. Agrees that any such notice or subpoena for his appearance and  
  testimony in an action pending in a United States District Court may be  
  served, and may require testimony, beyond the territorial limits imposed  
  by the Federal Rules of Civil Procedure. 

 

 5



IV. 
 
 In view of the foregoing, the Commission deems it appropriate, and in the public 
interest, to impose the sanctions agreed to in Respondent Sacco’s Offer. 
 
 Accordingly, pursuant to Section 8A of the Securities Act, Sections 15(b) and 
21C of the Exchange Act and Section 9(b) of the Investment Company Act, it is hereby 
ORDERED that: 
 
A. Respondent Sacco cease and desist from committing or causing any violations 
and any future violations of Section 17(a) of the Securities Act, Section 10(b) of the 
Exchange Act and Rule 10b-5 thereunder. 
 
B. Respondent Sacco be, and hereby is barred from association with any broker or 
dealer, 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 the right to reapply for association after two (2) years to the 
appropriate self-regulatory organization, or if there is none, to the Commission. 
 
C. Any reapplication for association by Respondent Sacco 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 the Respondent, 
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. Respondent Sacco shall be ordered to pay disgorgement of $215,892.52 plus 
prejudgment interest of $56,978.70 for a total payment of $272,871.22, but based upon 
Respondent Sacco’s sworn representations in his Statement of Financial Condition dated 
June 5, 2006 and other documents submitted to the Commission, the payment of all but 
$15,000 of the disgorgement and prejudgment interest is waived and the Commission is 
not imposing a penalty against Respondent Sacco.  Respondent Sacco shall pay 
disgorgement in the amount of $15,000 pursuant to the payment plan outlined below. 
 
E. Respondent Sacco shall pay $15,000 in 12 installments of $1,250.00 over a 36 
month period to the United States Treasury.  Sacco’s first payment of $1,250.00 shall be 
due thirty days after the date of entry of this Order and his remaining 11 payments shall 
be post-marked no later than the 30th of June, September, December and March of each 
year until December 30, 2009.  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 

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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 Charles Sacco as a Respondent in these proceedings and 
the file number of these proceedings, a copy of which cover letter and money order or 
check shall be sent to Merri Jo Gillette, Regional Director, Midwest Regional Office, 
Securities and Exchange Commission, 175 West Jackson Boulevard, Suite 900, Chicago, 
IL 60604. 
 
F. Respondent Sacco agrees that if the full amount of any payment described above 
is not made within ten (10) days following the date the payment is required by this Order, 
the entire amount of disgorgement, prejudgment interest and civil penalties, plus post 
judgment interest minus payments made, if any, is due and payable immediately without 
further application. 
 
G. The Division of Enforcement may, at any time following the entry of this Order, 
petition the Commission to:  (1) reopen this matter to consider whether Respondent 
Sacco provided accurate and complete financial information at the time such 
representations were made; and (2) seek an order directing payment of disgorgement and 
prejudgment interest and the maximum civil penalty allowable under the law.  No other 
issue shall be considered in connection with this petition other than whether the financial 
information provided by Respondent Sacco was fraudulent, misleading, inaccurate or 
incomplete in any material respect.  Respondent Sacco may not, by way of defense to any 
such petition:  (1) contest the findings in this Order; (2) assert that payment of 
disgorgement, interest and a penalty should not be ordered; (3) contest the amount of 
disgorgement and interest to be ordered or the imposition of the maximum penalty 
allowable under the law; or (4) assert any defense to liability or remedy, including, but 
not limited to, any statute of limitations defense. 
  
 
 By the Commission. 
 
 
 
      Nancy M. Morris 
      Secretary 
 

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