Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


10:35 AM
Connect Directly

NASD Goes on a $19.4 million Tear, ABA Endorses Searchspace, and more

NASD Fines Major Firms for Mutual Fund Shares Violations, Searchspace's AML Solutions Gets American Bankers Association Approval, Asset Managers Will Continue Focus on Compliance in 2006 Says Report

The NASD announced that it has levied fines totaling $19.4 million against the investment management firms Merrill Lynch, Pierce, Fenner & Smith, Wells Fargo Investments and Linsco/Private Ledger Corporation. The fines were for violations involving the sales of Class B and Class C mutual fund shares.

Merril Lynch received the bulk of the penalties with a $14 million fine. Wells Fargo was fined $3 million and Linsco was penalized $2.4 million. The amount of the charges approximate the additional commissions the firms received by selling Class B or Class C mutual fund shares rather than Class A shares.

NASD alleged that the three firms recommended Class B or Class C shares of mutual funds without adequate disclosure to their customers that an equal investment in Class A shares would generally be a more advantageous decision.

"In recommending mutual funds with different share classes, brokers must understand, consider and disclose information about which particular share class would be most beneficial for the customer from an expense perspective," said Barry Goldsmith, NASD executive vice president and head of enforcement, in release.

The investigation conducted by NASD examined transactions processed between January 2002 and July 2003. Each firm will implement a remediation plan to compensate its affected customers. NASD reports more than 29,000 households were affected.

The fines are part of NASD's ongoing investigation into mutual funds sales practices. Similar charges were settled earlier this year against Citigroup Global Markets, American Express Financial Advisors and Chase Investment Services.

1 of 3
Register for Wall Street & Technology Newsletters
Stressed Out by Compliance, Reputational Damage & Fines?
Stressed Out by Compliance, Reputational Damage & Fines?
Financial services executives are living in a "regulatory pressure cooker." Here's how executives are preparing for the new compliance requirements.