NASD Fines Alliance, Putnam, Scudder $700,000
February 19, 2007
The NASD has fined AllianceBernstein, Putnam Investments and DWS Scudder a total of $700,000 for improperly paying for entertainment and guest expenses at training and education meetings.
Scudder is paying $425,000, Putnam $175,000 and Alliance $100,000, although none of the firms admitted wrongdoing.
One of the parties that Scudder held was in 2002, where the firm recreated a 1970s discotheque. The firm also held fishing, golf and horseback riding events and lavished brokers and their spouses with dinners at expensive New York restaurants, the NASD said.
Putnam also paid for meals and entertainment, in addition to transportation, while Alliance paid for brokers and their guests to eat at expensive New York restaurants, attend Broadway shows and go on United Nations tours. NASD said Alliance also didn't have policies and procedures in place to comply with its non-cash compensation rules.
Scudder and Putnam engaged in the activity between 2001 and 2004, while Alliance's expenditures were made just in 2001, NASD said.
NASD said it limits the use of compensation, including non-cash compensation, to brokers to limit point-of-sale incentives from compromising their objectivity in matching their customers' investment needs with the appropriate product.
The "enforcement action underscores the need for distributors of mutual funds and variable annuities to understand the limits surrounding the use of non-cash compensation," said James S. Shorris, NASD executive vice president and head of enforcement.
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