The National Association of Securities Dealers today fined 2 broker-dealers $400,000 in connection with allegations that they gave misleading investment plan sales literature to U.S. military personnel.
The fine is to be paid to the NASD Investor Education Program for the benefit of the military community, NASD officials said in announcing the settlement.
The issuance and sale of the new “systematic investment plans,” also known as periodic payment plans, were prohibited by Congress last fall as part of a crackdown on sales of insurance products considered unsuitable for service personnel on military bases. Previously sold plans remain in force, NASD officials said.
These plans typically require investors to make a fixed number of monthly payments over a 10- to 15-year period, NASD officials said.
The 2 dealers involved in the current enforcement action are Fidelity Investments Institutional Services Company Inc., Smithfield, R.I., and Fidelity Distributors Corp., Boston. Both companies are units of Fidelity Investments, Boston.
Fidelity Investments Institutional and Fidelity Distributors settled the action without admitting or denying the charges, but they consented to the entry of the NASD’s findings, NASD said.
As part of the settlement, for the next 5 years, the 2 broker-dealers are required to notify securities holders who want to increase their investments in existing plans that additional shares of the underlying fund can be purchased outside the plans without the securities holders paying the additional creation and sales charges of up to 50% on the first year’s payments.