Piper Jaffray said in a filing this week that the National Association of Securities Dealers has told the firm to expect disciplinary action for directed-brokerage arrangements it entered into with several fund firms, the Associated Press reports.
Directed-brokerage deals, prohibited by the NASD, involve fund firms sending trading business to brokerages as a form of compensation for the brokerage selling the funds. However, the practice has come into question because of a potential conflict of interest, whereby a broker may push unsuitable funds to investors so that it can reap the benefit of the trading commissions it receives.
The filing by the Minneapolis-based firm said it contacted the NASD after the arrangements were uncovered during an internal review. "We have been notified that the NASD staff preliminarily has determined to recommend that disciplinary action be imposed on us based on such arrangements," according to the firms SEC filing.