The financial advisory unit of American Express violated its fiduciary duty to clients by providing secret incentives to its sales force to sell poorly performing in-house mutual funds, New Hampshire regulators allege. American Express Financial Advisors reportedly rewarded its sales staff with higher bonuses, more praise and, in some cases, with free one-year leases on Mercedes-Benz cars, for selling the proprietary funds. The New Hampshire Bureau of Securities Regulation investigated the unit's sales practices between 1999 to 2003 and has asked a hearing officer to impose penalties of up to $17.5 million, including restitution.

The complaints are particularly scarring because earlier this month American Express proposed to spin off its financial advisory unit, which analysts value at $10 billion.

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