The NASD announced Wednesday that it has fined Securities America $375,000 for improperly sharing $280,000 in directed-brokerage commissions, plus other payments, with former broker Michael Bullock, a 16-year veteran of the firm who worked in the Los Angeles area. The NASD also said that Securities America failed to properly supervise Bullock to ensure that his disclose his directed-brokerage commissions to his union-sponsored retirement plan clients.
The NASD also separately charged Bullock for accepting those payments and not revealing them.
“NASD will vigorously challenge all conduct that impermissibly compromises a broker’s objectivity, especially when retirement money is at stake,” said James S. Shorris, NASD executive vice president and head of enforcement. “In this case, Securities America approved Bullock’s improper arrangement to receive directed-brokerage commissions from mutual fund company portfolio transactions while advising his retirement plan clients to invest in this same mutual fund company’s securities. This violation of NASD’s rules governing mutual fund compensation, when coupled with the failure to disclose to the firm’s clients the terms of his financial arrangement, made for an intolerable situation.”
The NASD said this is the firm time a fund company directed brokerage specifically for the benefit of an individual broker, rather than to obtain overall shelf space at a brokerage firm.