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Industry Spotlight > Broker Dealers

NASD Levies Fines of $34 Million on 15 Broker/Dealers for Shelf Space Violations

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As part of what it called its effort “to eliminate conflicts of interest in the sale of mutual funds,” NASD fined 15 companies, including a number of AIG broker/dealers, a total of more than $34 million for violations of its Anti-Reciprocal Rule, which prohibits member firms from providing preferential treatment to specific mutual fund families in exchange for brokerage commissions. In announcing the fines on June 8, NASD Vice Chairman Mary Schapiro said that “NASD’s prohibition on the receipt of directed brokerage is designed to eliminate these conflicts of interest.”

NASD said that the 14 broker/dealers that were fined–under the settlement with the NASD, the firms neither admitted nor denied the charges–”operated ‘preferred partner’ or ‘shelf space’ programs that provided certain benefits to a relatively small number of mutual fund complexes in return for directed brokerage.”

The fines imposed on eight of the firms included charges relating to the firms’ failure to retain e-mails as required by the federal securities laws and NASD rules.

The firms, and the fines levied, are:

Royal Alliance $6.6 million
H.D. Vest $4.5 million
AllianceBernstein $3.9 million
LPL $3.6 million
Wells Fargo Investments $2.9 million
SunAmerica $2.5 million
FSC Securities $2.4 million
RBC Dain Rauscher $1.7 million
Securities America $2.4 million
McDonald Investments $1.5 million
AXA Advisors $900,000
Sentra Securities and Spelman $780,000
Advantage Capital $450,000
Advest, Inc. $286,415


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