The Five Dumbest Things on Wall Street This Week

5. Time Warp

Beat the Clock apparently was quite the pastime at Bear Stearns (BSC).

The big Wall Street firm agreed Thursday to pay $250 million to settle Securities and Exchange Commission charges that it acted as a full-service facilitator for abusive traders in the mutual fund scandal. Alleged abuses at Bear's big clearing operation have been well-documented by TheStreet.com's Matt Goldstein.

"Bear Stearns was the hub that connected the many spokes of market timing and late trading, hedge funds, brokers and mutual funds," said Mark Schonfeld, director of the SEC's Northeast regional office.

Market-timing is a legal but frowned-upon trading strategy that some mutual fund families tried to stop. Late trading is the illegal buying or selling of mutual fund shares after 4 p.m. in order to take advantage of late-breaking, market-moving news.

Bear neither denied nor admitted the allegations, but the SEC certainly got hold of some interesting telephone tapes. In one August 2003 call, the head of Bear's Mutual Fund Operations Department seems to be touting the firm's full-service approach to uncouth market actions.

Broker: Is there anything else you can think of that might -- that I could use -- any information that might be beneficial to me hearing now?
MFOD Head: Well, just to let you know -- just to get you aboard -- we probably do the best clearance there is on the Street on market timing, because it is infrastructurally built that we have, you know, very good experienced people here.

Later, the conversation continues:

Broker: What's the cut-off time?
MFOD Head: ... You have plenty of time to do trades [laughing]. Pretty much a quarter to six, 5:45 to enter a trade.

Judging by that $250 million hit, Bear's probably not laughing now.

Dumb-o-Meter score: 82. At least now Bear's out of the woods on this charge.

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