has slapped a fine of $375,000 on Securities America
for improperly sharing directed brokerage commissions from a mutual fund company with a former broker, Michael Bullock
, according to a news release on Wednesday. The regulator likewise found that Omaha, Nebraska-based Securities America, Ameriprise's brokerage arm, failed to take steps to ensure that Bullock disclosed his additional compensation to his union-sponsored retirement plan clients.
NASD officials did not name the fund company in the press release, but the
Los Angeles Times
identified the fund firm as MFS
Officials at the NASD described the case as the first of its kind.
Unlike other directed brokerage cases the NASD has pursued in the past, officials said this case is unique in that the mutual fund company directed brokerage specifically for the benefit of an individual broker.
Securities America settled without admitting nor denying the allegations.
Im a separate complaint, the NASD charged Bullock with improperly receiving directed brokerage commissions and other compensation of more than $280,000.
According to the NASD, Bullock entered into an arrangement with the mutual fund company to have thousands of dollars of brokerage commissions directed to him every month, which he then used to hire a sales assistant to help him find new retirement plan clients. The NASD said the arrangement was approved by Securities America and from 2002 through 2003, the brokerage firm received $420,000 in directed commissions from the fund company for Bullock's benefit. Securities America paid Bullock $262,500 and retained $157,500.
Bullock periodically advised his retirement plan clients to select or maintain the fund company's mutual funds, but didn't disclose that he was getting additional compensation from that company, the NASD found in its investigation.
All but one of Bullock's retirement plan clients had at least one mutual fund from that mutual fund company in their plans.
"In this case, Securities America approved Bullock's improper arrangement to receive directed brokerage commissions from mutual fund company portfolio transactions while advising his retirement plan clients to invest in this same mutual fund company's securities," said James S. Shorris
, NASD executive vice president and head of enforcement.
"This violation of NASD's rules governing mutual fund compensation, when coupled with the failure to disclose to the firm's clients the terms of his financial arrangement, made for an intolerable situation," he said.
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