After not paying investors the more than $86 million worth of breakpoint discounts they deserved, 15 brokerages were forced to settle for $21.5 million with the SEC and NASD yesterday, as reported, and all will have to pay the investors what they are owed.

When the Securities and Exchange Commission studied breakpoint discounts last year, it found that almost a third of firms offering them were not following through. What ensued was action against ,and now a settlement with, the 15 firms, including Bear Stearns and Lehman Brothers .

In statements, many of the companies called the non-refunds mistakes, rather than any form of corruption, but all were apologetic.

"Although we believe that our financial advisers acted in good faith, we should have done a better job," said Thomas James, chairman of Raymond James Financial, whose company’s statement said "miscalculations" led to the problem.

"We are embarrassed by this incident. Our participation in the SEC/NASD settlement reflects that. Together with the rest of the industry, Raymond James is committed to improving business practices," James said.

The settlement stipulates that firms involved must offer the discounts by March 31.

The other 12 firms that settled were Legg Mason, Wachovia, UBS, American Express Financial, Linsco/Private Ledger Corp., H.D. Vest Investment Securities, Cresap Inc., SWS, Kirkpatrick Pettis Smith Polian, Inc., Southwest Securities, David Lerner Associates and Brecek Young Advisors.

A vote is expected later this year on an SEC proposal that more clearly outlines for investors the conditions of receiving breakpoint discounts.

 

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