NASD Fines Four Firms For Not Waiving Charges
December 18, 2006
The NASD fined four brokerage firms $850,000 for failing to waive front-end sales charges for customers buying Class A shares by not having adequate supervisory systems and procedures in place. In addition, the companies must repay $43.8 million to the overcharged customers.
Edward Jones, RBC Dain Rauscher and Royal Alliance Associates are each paying a fine of $250,000, but Morgan Stanley is paying only $100,000 since, the NASD said, it took remedial measures.
As far as the remediation is concerned, Edward Jones is paying $25 million, plus interest; RBC Dain Rauscher $6.8 million, plus interest; Royal Alliance $1.6 million, plus interest; and Morgan Stanley $10.4 million, plus interest.
"Securities firms must learn all of the relevant pricing features of the fund shares they sell and ensure that eligible investors receive all available discounts and sales charge waivers-without exception," said James S. Shorris, NASD executive vice president and head of enforcement.
From 2002 to 2004, a number of mutual fund families offered customers who redeemed shares for which they paid a sales charge to use that money to buy Class A shares of a new mutual fund without paying a sales charge. The NASD found that the four brokerages failed to eliminate the front-end sales charge.
In settling with the NASD, the firms neither admitted nor denied the charges but consented to the entry of NASD's findings.
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