The NASD Tuesday fined three MetLife Securities companies $5 million for allowing late trading of mutual funds, providing inaccurate and misleading information to the NASD and failing to produce e-mails in a timely fashion.
The three companies are MetLife Securities, New England Securities and Walnut Street Securities.
The NASD first submitted a request for information on late trading of mutual funds to the three companies in September 2003. The companies said they were not aware of any late-trading transactions and that they all had policies and procedures in place to ensure than any order received after 4 p.m. would be executed the following day.
However, the NASD found over the next several months that the companies knew this was not the case. Although in April 2004 the firms' internal auditors had uncovered as many as 19,000 potential late trades and, in fact, determined in June 2004 that roughly 800 of them were, indeed, late trades, it was not until that December that they shared the information with the NASD.
"NASD relies on firms to respond accurately and promptly to requests for information on matters of regulatory concern," said James S. Shorris, executive vice president and head of enforcement at the NASD. "Part of the problem in this case stemmed from the decision by the MetLife firms to respond to a regulatory inquiry by relying upon a committee without clear lines of authority or specifically identified individuals responsible for the adequacy and accuracy of information that was provided."
Further compounding "an already unacceptable situation," Shorris continued, was that the company didn't correct the information for more than a year.