From the April 2008 issue of Investment Advisor • Subscribe!

NEWS & PRODUCTS, APRIL 2008

FINRA has settled cases against five firms for mutual fund sales and supervisory violations, imposing an $800,000 fine against Prudential Securities and a $750,000 fine against UBS Financial Services, for improper sales of Class B and Class C mutual fund shares, and a $100,000 fine against Pruco Securities for improper sales of Class B shares. These firms also agreed to remediation plans that will address over 27,000 fund transactions in the accounts of 5,300 households. To resolve the NAV violations, Merrill Lynch, Prudential Securities, UBS, and Wells Fargo agreed to remediation plans for eligible customers who qualified for, but did not receive, the benefit of NAV transfer programs. It is estimated that total remediation to customers will exceed $20 million. Prudential Securities, UBS, and Merrill Lynch were fined an additional $250,000 each for failure to have reasonable supervisory systems and procedures to identify and provide opportunities for investors to obtain sales charge waivers through NAV transfer programs...

Fidelity Investments has agreed to pay an $8 million penalty for accepting over $1.6 million in gifts and entertainment from outside brokers. The SEC determined that the investment company allowed brokers to influence its broker selection process by swaying employees with gifts and through personal relationships. Besides monetary charges, compliance with the SEC settlement includes Fidelity's agreement to cease any further violations, and to hire an independent consultant to review its policies and procedures regarding equity trading operations, conflicts, and gifts...

FINRA fined and suspended 16 registered reps of State Farm VP Management Corp. of Bloomington, Illinois, for misconduct involving continuing education requirements. Nine supervisors allowed subordinates to take State Farm's "Firm Element" proficiency test for them, one supervisor directed a subordinate to take the test for other registered reps, and six completed the test for their superiors. The individuals received fines ranging from $5,000 to $10,000 and suspensions ranging from 30 days to six months. One representative also was barred as a principal...

INVEST Financial Corporation appointed Nathan Rheinhardt as VP of advisory services, with responsibility for helping INVEST's financial institution and independent advisor partners make the transition to offering fee-based investment advisory services...

Oppenheimer Co. will pay a fine of $250,000 for supervisory and other failures in connection with improper market timing of mutual fund shares in 2003. The firm will also pay $4.25 million in restitution to more than 60 mutual fund companies. FINRA found that Oppenheimer failed to prevent five traders from conducting short-term trading of mutual funds on behalf of hedge fund customers, and also failed to establish, maintain, or enforce supervisory systems and written procedures to detect and prevent improper market timing activities, or to maintain required books and records of the short-term trading of mutual funds through other firms' trading platforms. All five traders involved in the improper market timing have been barred from the securities industry.

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