The SEC fined Ameriprise $15 million in disgorgement and civil penalties for allowing certain shareholders to market time the mutual funds it advised, the American Express Funds, when the fund's prospectus specifically forbids market timing.
Merri Jo Gillette, regional director of the Commission's Midwest regional office, said, "By failing to inform investors that it deviated from the AXP Funds' prospectus disclosures in allowing certain known market timers to continue trading in and out of the funds it advised, [American Express] ignored its responsibility to treat all fund shareholders fairly and honestly."
The NASD fined Ameriprise $12.3 million for providing preferential treatment to certain mutual fund companies in exchange for their directed-brokerage business. "This case demonstrates that NASD will remain vigilant in its efforts to eliminate conflicts of interest in the sale of mutual funds," said Barry Goldsmith, NASD executive vice president and head of enforcement. "NASD's Anti-Reciprocal Rule is an important regulatory tool that is designed to ensure that firms recommend mutual funds on their merits and not because of the receipt of brokerage commissions, which are assets of the mutual fund shareholders and should not be used for marketing purposes."
The SEC also fined Ameriprise an additional $30 million in disgorgement and civil penalties for failing to adequately disclose millions of dollars in revenue-sharing payments that is got from certain companies. The company is also required to make certain disclosures to its customers about its revenue sharing program.
Linda Chatman Thomsen, director of the Commission's division of enforcement, said, "This settlement reiterates how important it is for financial industry professionals to fully disclose the nature and extent of their conflicts of interest to customers."