The NASD has fined eight broker/dealers, including one mutual fund distributor, Lord Abbett Distributor, $7.75 million for giving favorable treatment to mutual funds in exchange for earning trading commissions on directed-brokerage business. The sanctions are the latest in what NASD says is an ongoing enforcement sweep to detect violations of its anti-reciprocal rule. In June, NASD fined 15 brokerages, including six subsidiaries of AIG, $34 million for these violations.
"We continue to pursue conduct which puts the interests of firms ahead of the interests of customers," said Barry Goldsmith, NASD executive vice president and head of enforcement. "NASD's prohibition on the receipt of directed brokerage is designed to eliminate these conflicts of interest in the sale of mutual funds, whose costs are paid not by the mutual fund company but by the funds' shareholders."