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NASD Fines Merrill, Wells Fargo, Over Fund Sales

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The NASD on Monday [December 19] fined Merrill Lynch (MER) and Wells Fargo (WFC) a total of $17 million for steering investors into inappropriate shares of mutual funds.

Merrill was fined $14 million and Wells Fargo was fined $3 million. The NASD also fined a third investment firm, Linsco/Private Ledger Corp., $2.4 million, for selling shares that were not suitable for investors.

The firms recommended class B or C shares, or both, without disclosing that class A shares “would generally have been more advantageous” to investors “in view of all relevant considerations,” the NASD said.

Class A shares often carry front-end, or sales charges, that B and C shares typically do not. But B and C shares normally impose asset-based sales or redemption charges that may be higher than charges associated with A shares.

In settling the charges, the three firms neither admitted nor denied wrongdoing. In addition to the fines, the firms will set up compensation programs for investors. People who have sold some or all of their class B or class C shares will be eligible to receive cash in addition to, or instead of, class A shares.

More than 29,000 households were sold inappropriate shares in nearly 140,000 transactions between January 2002 and July 2003, the NASD said.

Contact Bob Keane with questions or comments at: [email protected].


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