Four Brokers Settle With NASD Over Improper Mutual Fund Sales

The NASD has settled with four brokerages over improper mutual fund sales. Combined, they are paying fines of $1.2 million.

For improper sales of Class B shares, MML Investors Services is paying $473,000 and NYLIFE Securities $354,000. Securities America is paying $322,000 for improper sales of Class B and Class C shares. The NASD is fining Northwestern Mutual Investment Services $100,000 for not having adequate supervisory systems and procedure to ensure that client received net asset value (NAV) pricing under NAV transfer programs. The NASD said MML also failed to have similar supervisory systems, but did not impose a fine on the company since it took remedial actions to correct this prior to the NASD’s detection. The regulator said it reduced Northwestern’s fine since it immediately took steps to improve its NAV transfer systems after an NASD examination.

In addition to these fines, MML and Northwestern must pay remediation to customers who qualified for but did not receive the benefit of available NAV transfer programs. For MML, that is $2.56 million, and for Northwestern, that is $2 million.

“The cases announced today are the result of NASD’s continuing commitment to help ensure that sales of mutual funds are made appropriately and with the benefit of full consideration of all available share classes and pricing features,” said James S. Shorris, NASD executive vice president and head of enforcement. “These firms failed to implement reasonable supervisory procedures to ensure that these considerations were addressed on a consistent basis.”

Shorris added that the NASD hopes that its decision not to fine MML for supervisory system violations and to reduce Northwestern’s fine “will encourage other firms to increase their efforts to proactively identify compliance problems.”