Massachusetts Financial Services last week agreed to pay a $50 million fine to the SEC for not disclosing directed-brokerage agreements, marking the first time the SEC has penalized a fund company for failing to disclose its trading arrangements with brokerage firms in exchange for promoting its funds.

The case follows a similar one the SEC, along with the NASD, lodged against Morgan Stanley last fall, where regulators accused the brokerage of charging 16 mutual fund companies higher fees in exchange for recommending their funds, without disclosing this to investors (see MME 11/24/03).

MFS put a temporary stop to directed brokerage in November and, shortly after, decided to end it permanently.

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