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October 11, 2005 at 08:00 PM
The National Association of Securities Dealers has levied more than $7.75 million in fines against 8 broker-dealers.[@@]
The NASD, Washington, says the companies fined directed customers to certain funds in exchange for extra commissions.
The NASD says all of the cases involve apparent violations of its Anti-Reciprocal Rule, which bars brokers from favoring the sales of a mutual fund on the basis of commissions paid by the firm and prohibits a firm from recommending funds or establishing preferred lists of funds in exchange for receipt of directed brokerage.
“We continue to pursue conduct which puts the interests of firms ahead of the interests of customers,” says NASD Executive Vice President Barry Goldsmith. “NASD’s prohibition on the receipt of directed brokerage is designed to eliminate these conflicts of interest in the sale of mutual funds, whose costs are paid not by the mutual fund company, but by the funds’ shareholders.”
The NASD says 7 of the firms involved operated “preferred partner” or “shelf space” programs and that the other firm is a mutual fund distributor that paid to participate in shelf space programs. The NASD says the programs violated the broker-dealers’ obligation to consumers.
The broker-dealers fined are National Planning Corp. Inc., Santa Monica, Calif., and 3 National Planning broker-dealer affiliates. National Planning is a unit of Jackson National Life Insurance Company, Lansing, Mich., a unit of Prudential P.L.C., London.
National Planning and its subsidiaries were fined $3.8 million, according to the NASD.
