NASD Slams Broker-Dealer With Fine For VA Market Timing
The National Association of Securities Dealers has fined a Richmond, Va.-based broker-dealer $450,000 in what the NASD calls its first ever case involving alleged market timing abuses in variable annuities.
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The broker-dealer, Davenport & Co., LLC, is charged with facilitating deceptive market timing. In addition to the fine, Davenport was ordered to pay $288,000 in restitution to the affected funds.
“Deceptive market timing in variable annuity subaccounts can dilute the value of those shares, raise transaction costs and thus harm other annuity investors,” says Mary L. Schapiro, vice chairman of the NASD, in a statement.
“This is an improper and objectionable trading practice that rises to a higher level of abuse when the firm not only knows that its clients intend to deceive variable annuity companies, but is complicit in carrying out that deception,” Schapiro says.
But in a statement, Davenport & Co. says that at the time the alleged market timing occurred, it believed the particular trades were appropriate.
The market timing at issue, the company says, involved a small number of trades made by 2 of its sophisticated institutional customers.
“As part of our own internal review, Davenport has determined that it will no longer accept accounts of market timers, and has terminated its relationship with the 2 institutional customers in question,” the company says.
Davenport adds that from the outset of the NASDs review, it cooperated fully, Indeed, the company says, it was Davenport that called the NASDs attention to these particular issues and the related transactions.