The National Association of Securities Dealers has imposed $34 million in fines on broker-dealers for directing customers to mutual funds that paid the broker-dealers extra commissions.[@@]
The NASD, Washington, says charging fund companies for “shelf space” or “preferred partner” status violates broker-dealers’ obligations to customers.
“When recommending mutual fund investments, funds must act on the basis of the merits of the funds and the investment objectives of the customers and not because of other benefits the brokerage firm will receive,” NASD Vice Chairman Mary Schapiro says in a statement about the fines.
Many of the 15 broker-dealers that received the fines are affiliates of American International Group Inc., New York, or AXA S.A., Paris.
At AXA, AllianceBernstein Investment Research and Management Inc., New York, is paying a fine of about $4 million; AXA Advisors L.L.C., New York, is paying a $900,000 fine; and Advest Inc., Hartford, is paying a $286,415 fine.
A representative for AllianceBernstein declined to comment, and Susan Bailey, a spokeswoman for Advest, and Jeff Tolvin, a spokesman for AXA Advisors, said their firms have discontinued “directed brokerage” practices.
At AIG, 6 broker-dealer units are paying a total of more than $12 million in fines.
“Our broker-dealers cooperated fully with the NASD,” says John Pluhowski, a spokesman for AIG’s retirement services unit. “We’re pleased to have reached a settlement.”
AIG’s broker-dealer units discontinued directed brokerage practices in 2004, Pluhowski says.