Feb. 16, 2005 — Broker regulator NASD on Wednesday charged American Funds Distributors Inc. with directing about $100 million to brokerage firms to reward them for for being the top sellers of American Funds.
The payments were made to about 50 firms between 2001 and 2003 to reward them for past sales and to encourage future sales, NASD said.
American Funds Distributors is the principal underwriter and distributor of American Funds, the third largest domestic fund family with more than $450 billion in assets, NASD said. American Funds is a unit of Capital Research and Management Co. Capital Research could not immediately be reached for comment.
The payments, NASD said, violate its Anti-Reciprocal Rule, which is aimed at preventing quid quo pro arrangements in which brokerage commissions are used to compensate brokerage houses for selling fund shares.
Other "directed brokerage" cases have been brought before, but these have focused on brokerage firms that received payments from mutual fund companies in return for "giving preferential treatment to their funds," NASD vice chairman Mary Schapiro said in a statement. "Today's action makes clear that it is just as impermissible to offer and make such payments as it is to receive them."
Contact Bob Keane with questions or comments at: bkeane@investmentadvisor.com.
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