From the June 2007 issue of Investment Advisor • Subscribe!

NEWS & PRODUCTS, June 2007

NASD has fined two Fidelity broker/dealers for preparing and distributing misleading sales literature promoting Fidelity's Destiny I and II Systematic Investment Plans, which were sold primarily to U.S. military personnel. NASD found that between January 2003 and January 2006, Fidelity Investments Institutional Services Company, Inc. of Smithfield, Rhode Island and Fidelity Distributors Corporation of Boston, Massachusetts violated NASD advertising rules by preparing and distributing various pieces of misleading sales literature, including skewed performance claims. The $400,000 fine will be paid to the NASD Investor Education Foundation (a tax-exempt, non-profit organization) to help fund its Military Financial Education Campaign, launched in February 2006. As part of the settlement, for the next five years, the two B/Ds are also required to notify Destiny Plan holders who want to increase their investments in existing Destiny Plans that additional shares of the underlying fund can be purchased outside the Destiny Plans without paying the additional creation and sales charges of up to 50 % on the first year's payments...

The broker/dealers of ING plan to lower fees that their advisors pay on two core advisory programs--Prime and Preferred Asset Management--for three of its retail B/Ds: ING Financial Partners, Multi-Financial Securities, and Financial Network Investment Corporation. Administrative fees with the new structure are as low as 4.5 basis points on total assets under management and 1.5 basis points for individual accounts. The lower fee structure does not impact customer fees, which are determined by individual advisors...

According to the Securities and Exchange Commission, two employees at the Boca Raton office of St. Louis-based broker/dealer, AG Edwards and Sons, Inc., have been charged with illegal market timing schemes on behalf of a customer. The SEC alleges that AG Edwards' Boca Raton and Lake Worth Branch Manager James Edge "failed to properly supervise" Boca Raton branch office registered representative Thomas Bridge, and that Bridge "committed fraud by using deceptive tactics to place market timing trades on behalf of a customer." The SEC ruling carries with it an SEC censure, and also requires AG Edwards to pay disgorgement and prejudgment interest of $2.36 million and civil penalties of $1.5 million, for a total payment of $3.86 million. Under law, a hearing will be now be held by an administrative law judge to determine the truth of the allegations, to provide those charged with an opportunity to dispute the allegations, and to determine if the sanctions imposed by the SEC are appropriate. That hearing must be held within 300 days...

Bear Stearns' Broker/Dealer & Investment Advisor Services (BDIAS) has hired two technology executives to enhance its technology platform. Suresh Chakravarthi joins the firm as head of the BDIAS Technology Team. Most recently, Chakravarthi was an executive at Pershing where he oversaw information delivery, client technology management, and the firm's integration with The Bank of New York. Shailesh Shah was hired as a managing director, reporting to Chakravarthi. Before joining Bear Stearns, he was the chief technology officer at Variman, a hedge fund administrator. The new hires are based in New York.

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