John Hantz, the Southfield, Mich.-based firm's President, CEO, founder and primary owner, was also censured and suspended for 30 days for failing to supervise the firm's revenue-haring activities.
Hantz has also agreed to implement remedial measures. They include making specific and immediate disclosures on its Web site about its potential conflicts and updating policies and procedures, as well as hiring an independent consultant to oversee compliance.
NASD has found that, despite Hantz representing itself to clients as an independent firm, it actually had a single preferred supplier for each product category and directed a majority of the sales to those preferred suppliers in exchange for millions of dollars in marketing fees or special cash compensation.
"This firm portrayed itself as independent, unbiased and armed with a myriad of product alternatives to meet its clients' needs -- when, in fact, it was captive to a few preferred suppliers," said Barry Goldsmith, NASD executive vice president and head of enforcement. "Hantz Financial failed to meet its fundamental obligation to put its customers' interests first, and to disclose material conflicts of interest arising from revenue-sharing arrangements, not to hide them."
For its part, Hantz issued a press release late last week indicating its violations of NASD rules were "non-scienter, the legal term for unintended." In addition, Bradly J. Schram, a partner and principal with Hertz, Schram and Saretsky, who is representing Hantz and his eponymous firm, noted that the revenue-sharing arrangements amounted to only 7% of the firm's revenue.
"It has always been the intent of HFS and Mr. Hantz to place the best interest of their clients first," Schram said in a statement. "To the best of my knowledge, no clients have ever complained or initiated any legal action based upon these charges."