The NASD intensified its regulatory focus on sales of mutual funds, variable annuities and 529 college savings plans in 2005, and did so by increasing its enforcement actions. In 2005 the NASD set records as 1,412 enforcement actions were brought forth, 1,296 of which were resolved. Of the enforcement actions brought forth this year, 400 were mutual fund-related.
A total of $125.4 million was collected in fines this year compared with $103.9 million last year and $33.3 million in 2003, according to the NASD.
The NASD intensified its focus on mutual fund sales and trading issues, as it brought 12 disciplinary actions having to do with dishonest market timing, late trading unsuitable sales of Class B and Class C mutual fund shares and impermissible revenue sharing. Six major firms were fined this past year - Citigroup Global Markets, American Express Financial Advisors, Chase Investment Services, Merrill Lynch, Wells Fargo, and Linsco/Private Ledger - totaling more than $40 million for unsuitable B share and C share sales.
In regards to firms that provided preferential treatment to select mutual funds, NASD settled 27 cases, the largest being against Ameriprise Financial Services, which was fined $12.3 million. The rest of the six firms paid almost $55 million in fines.
There were 11 cases brought forth against firms for facilitating deceptive market timing in mutual funds or variable annuity sub-accounts, and for failing to impose certain procedures to prevent late trading of mutual funds. The two largest of these types of scandals were: ING Fund Distributor, fined $1.5 million and ordered to pay $1.4 million in restitution, and Janney Montgomery Scott, which was fined $1.2 million, and forced to pay $1 million in restitution.