News Flash- Piper Jaffray to Face Action For Directed Brokerage
August 16, 2004
Piper Jaffray indicated in a recent filing with the SEC that the National Association of Securities Dealers has told the firm to expect disciplinary action for directed-brokerage arrangements it entered into with several fund firms. Directed-brokerage deals, prohibited by the NASD, involve fund firms sending trading business to brokerages as a form of compensation for the brokerage selling the funds. However, the practice has come into question because of a potential conflict of interest, whereby a broker may push unsuitable funds to investors so that it can reap the benefit of the trading commissions it receives. The firm contacted the NASD after the arrangements were uncovered during an internal review, and in response, the NASD said it "preliminarily has determined to recommend disciplinary action," according to the filing.