Is the NASD
entering the final stretch of its crackdown on undisclosed directed brokerage arrangements? The regulator's chief enforcement official thinks so.
On Wednesday, NASD announced that it has slapped a fine of over $1.1 million against American General Securities Inc., an affiliate of American International Group, for giving preferential treatment to certain mutual fund companies in exchange for receipt of directed brokerage. The action is the latest in a host of enforcement actions brought by the regulator against firms found to have violated the Anti-Reciprocal Rule, which bars firms from favoring the sale of shares of particular mutual funds on the basis of brokerage commissions received by the firm.
"We've brought a lot of cases, probably 30 or more, and I think we're pretty much getting to the end of the road," James Shorris
, head of enforcement at NASD, told Dow Jones
. He added that there may be a couple more cases involving similar violations.
Shorris expressed hopes that "mutual funds and distributors have gotten the message that this kind of behavior violates our rule and can't be tolerated."
Among the firms sanctioned by the NASD last year were Ameriprise Financial Services, formerly American Express Financial Advisors, Lord Abbett Distributor LLC, AllianceBernstein Investment Research and Management, Wells Fargo Investments and Sun America Securities.
Mutual fund firms were also not spared. In February 2005, NASD filed a case against American Funds Distributors, claiming it broke securities rules from 2001 to 2003 when it gave stock trading business to brokerages that promoted its funds to clients. That case hasn't been resolved because American Funds opted to challenge the regulator's accusations.
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