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"NASD remains committed to ensuring that firms comply with our rules in connection with the marketing and sale of mutual fund shares," said James Shorris, NASD executive vice president and head of enforcement. "The anti-reciprocal rule 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 NASD found that American General Securities promoted 12 mutual fund fund families between January 2002 and September 2003 in exchange for revenue sharing, whether in the form of directed brokerage or cash. This preferential treatment included being listed on American General's "preferred product sponsor" list, access to the firm's top producers in training meetings and special mention in internal marketing publications.
Three of the 12 companies directed $2.7 million worth of trades to American General, while the remaining nine paid the firm directly in cash. The NASD did not identify how much those payments totaled. It also did not identify the 12 mutual fund companies involved.
American General neither admitted or denied the charges but consented to the entry of the NASD's findings.
