NU Online News Service, Nov. 12, 2004, 5:33 p.m. EST
The U.S. Securities and Exchange Commission has started asking questions about use of “directed brokerage” at Hartford Life Inc., Simsbury, Conn.[@@]
Hartford Life, a unit of Hartford Financial Services Group Inc., has described the investigation in a quarterly report filed with the SEC.
The term “directed brokerage” refers to the practice of mutual fund managers directing trades through securities broker trading desks to reward the brokers for selling the fund companies’ mutual funds.
The SEC voted to ban directed brokerage arrangements in August.
“The Hartford continues to cooperate fully with the SEC, the New York attorney general’s office and other regulatory agencies,” Hartford Life says in its quarterly report.
Hartford Life also notes in the report that it is having trouble restricting speculators’ ability to use its mutual funds and variable annuities to “time the market,” or benefit from rapid trades, because some of its products lack restrictions on frequency of transfers. The company adds that an earlier court settlement limits its ability to restrict the ability of some owners of older variable annuities to make transfers.
“A number of companies have announced settlements of enforcement actions with various regulatory agencies, primarily the SEC and the New York attorney general’s office, which have included a range of monetary penalties and restitution,” Hartford Life says. “While no such action has been initiated against the company, it is possible that the SEC, the New York attorney general’s office or other regulatory agencies may pursue action against the company in the future. The potential timing of any such action is difficult to predict.”