NEWS & PRODUCTS, OCTOBER 2007

FINRA has fined AXA Advisors, LLC, $1.2 million for “failing to adequately supervise its fee-based brokerage business, and for distributing misleading sales literature for its fee-based brokerage account program, CapAdvantage.” FINRA found that the firm’s system and procedures were not designed to determine whether the program initially was, or remained, appropriate for customers opening the accounts. One result of this was that AXA Advisors allowed many investors with less than the required $50,000 in assets to open CapAdvantage accounts. One customer opened a fee-based account with just $2,000 and AXA Advisors assessed fees until the account was depleted of all funds. FINRA also found that AXA Advisors used written internal and external communications that were misleading. The firm told brokers and clients that the accounts would not be charged asset-based fees until the account reached $50,000. While this accurately reflected the firm’s initial intention, it did not reflect how fees were actually charged. More than 1,500 customers were charged fees before reaching the “minimum” account level. FINRA ordered AXA Advisors to return $1.4 million in fees to approximately 1,800 customers who were inappropriately placed or kept in fee-based brokerage accounts. The firm is voluntarily refunding to customers an additional $1.2 million, making the total amount returned to CapAdvantage customers more than $2.6 million.

The AIG Advisor Group announced organizational changes: Larry Roth, currently president and CEO of Royal Alliance, succeeds Peter Harbeck as CEO of AIG Advisor Group. Harbeck will continue as chairman. Arthur Tambaro, vice chairman and COO, Royal Alliance, will succeed Roth as president of Royal Alliance. Joby Gruber, president and CEO, FSC Securities Corp., and Advantage Capital Corp., has been named to the additional post of president, AIG Advisor Network. Jim Cannon, president and CEO, AIG Financial Advisors, and American General Securities, will assume expanded responsibilities as president, AIG Investment Advisory Services. Randy Epright, senior VP, COO, and chief information officer of AIG Retirement Services, Inc., will become executive VP and COO, AIG Advisor Group.