Davenport & Co., a Richmond, Va.-based brokerage firm, market timed variable annuity sub-accounts on behalf of two of its hedge fund clients, the National Association of Securities Dealers charged Tuesday, ordering Davenport to pay $450,000 for improper trading.

The NASD fine includes an order for Davenport to pay $228,000 in restitution to variable annuity shareholders who suffered as a result of the firm’s rapid-fire trading. The fine also cites Davenport for failing to establish an adequate supervisory system and its inability to document a policy aimed at preventing late trading of mutual funds. By fining Davenport, the NASD solidified its position that market timing in variable annuities crosses the line of improper trading activities and harms variable annuity shareholders.

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