For those Morgan Stanley brokers who thought they were headed for the glory of Tom Cruise in "Days of Thunder," the National Association of Securities Dealers has another idea. NASD has fined Morgan Stanley $2 million for conducting prohibited mutual fund sales contests that offered such outlandish perks as tuition to a racing-car school.
In addition, NASD charged both the firm and Bruce F. Alonso, head of its retail sales division, with supervisory violations. Alonso has been censured and fined $250,000. In settling the accusations, neither Morgan Stanley nor Alonso admitted or denied the charges.
NASD said that in a national campaign whose goal was to achieve $5 billion in sales of Morgan Stanley funds, national, regional and branch sales managers set individual sales goals of $50,000 to $100,000 per financial adviser. In 29 separate contests, Morgan Stanley allegedly tried to entice salespeople to sell these funds by offering not only monetary rewards but also tickets to NBA finals, Rolling Stones and Britney Spears concerts, and trips to such places as Hawaii and the Caribbean. Other prizes included tuition for golf school and a high-performance automobile racing school. Managers bonuses, meanwhile, were tied to sales of the firms proprietary funds, NASD said.
"It is not acceptable for NASD-regulated firms to hold contests for prizes that promote the sale of one fund, especially their own, over other mutual fund products," said Mary L. Schapiro, NASDs vice chairman and president of regulatory policy and oversight.
