A.G. Edwards spelled out more about its troubles with the NASD in its quarterly report
filed Monday with the SEC. The St. Louis-based brokerage firm revealed that it faces NASD action over the sale of class B and class C shares of funds.
The NASD is recommending action based on "the grounds for recommending such sales, suitability violations and the company's supervisory procedures." Company officials also disclosed that the NASD is recommending additional disciplinary action in regards to sales of funds that paid revenue sharing. Those funds were sold to IRA account holders in 2001 and 2002.
The NASD also made a verbal settlement proposal to the brokerage. The terms would include a fine, an option for shareholders to switch their holdings class A shares, reimbursement for any disadvantage based on actual performance and the retention of an independent consultant to review supervisory procedures.
The broker did not disclose the size of the potential fines, but did say that the settlement will not be material to its consolidated financial condition though it could be material to operating results in at least one period.
Edwards' officials also said that the firm changed certain policies and procedures and developed and implemented additional policies and procedures relating to the receipt and supervision of mutual fund orders. Those changes were a follow up to a NASD requested review of its systems and controls for all mutual fund orders for a year to determine whether late trading in mutual funds occurred.
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