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Regulation and Compliance > Federal Regulation > SEC

Ameriprise Negotiates Deals With Securites Regulators

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A major financial services company says it will be spending about $59 million on settlements to resolve concerns of state and national agencies about its mutual fund sales and management practices.[@@]

The company, Ameriprise Financial Inc., has negotiated settlements with the Minnesota Department of Commerce, the U.S. Securities and Exchange Commission and the National Association of Securities Dealers, Washington.

“It should be noted that the costs of these settlements were reserved for in prior quarters and will have no effect on the company’s fourth quarter 2005 earnings,” the company says.

Standard & Poor’s, New York, says the settlement announcements will have no effect on its Ameriprise ratings because the potential existence of the fines and other penalties already are factored into the company’s ratings.

Until recently, Ameriprise operated as American Express Financial Advisors, a unit of American Express Company, New York. American Express turned Ameriprise into a separate company in September by giving shares of Ameriprise stock to American Express shareholders.

Ameriprise has reached 2 separate settlements with the SEC.

- Ameriprise will pay $15 million in disgorgement and civil penalties to the SEC to settle charges that AEFA had inadequate procedures in place for enforcing rules against market timing between early 2002 and October 2003, and that AEFA let some mutual fund and variable annuity holders time the market after forbidding customers to do so.

- Ameriprise Financial Services Inc., an Ameriprise broker-dealer unit, will pay $30 million in disgorgement and civil penalties in connection with SEC concerns about revenue-sharing programs.

The SEC says the company now known as Ameriprise Financial Services gave preferential treatment to mutual funds with revenue-sharing agreements without adequately disclosing the agreements to customers.

In addition, Ameriprise Financial Services has agreed to give customers more information about its revenue-sharing arrangements.

The SEC says Ameriprise consented to the market-timing order and the Ameriprise Financial Services unit consented to the revenue-sharing order without admitting or denying the findings in the orders.

Ameriprise Financial Services also has agreed to pay $12.3 million in fines to the NASD to resolve NASD concerns about AEFA mutual fund revenue-sharing arrangements in place between January 2001 and December 2003.

“In settling with NASD, Ameriprise neither admitted nor denied the allegations, but consented to the entry of NASD’s findings,” the NASD says in a statement.

In Ameriprise’s home state, Minnesota Commerce Commissioner Glenn Wilson says Ameriprise will pay a $2 million civil penalty to resolve his department’s concerns about market-timing and revenue-sharing issues.

The state settlement will require Ameriprise to complete a compliance review of its sales practices and its written procedures regarding market timing, revenue sharing, 529 college savings plans and Class B mutual fund sales practices.

The report, due in 1 year, must include a review of “sales literature, brokerage-only information, scripts, visuals, presentations and other information distributed to AEFA agents or customers,” Minnesota officials say.

Wilson says state and federal authorities worked together to conduct the Ameriprise investigations.

“We have been in communication with federal regulators about their independent investigations, and we believe it makes sense for regulatory agencies to complement and not duplicate investigative and settlement activities,” Wilson says.


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