Money Management Executive

SEC, NASD to Investigate Alleged Price Gouging on Sales Loads

Published January 16, 2003, 1:00 a.m. EST

1 Min Read

The Securities Exchange Commission as well as the National Association for Securities Dealers announced today that they are conducting an investigation into the practices of firms that charge front-end sales loads on mutual funds.

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The agencies said that they are garnering reports from all NASD member firms regarding their policies and procedures in an effort to ensure that investors are not overcharged on sales loads. In addition, the two agencies have partnered with the New York Stock Exchange to investigate the practices of firms that sell mutual funds with front-end loads.

The SEC has also asked the Investment Company Institute to convene a committee under the NASDs guidance to find ways to ensure that investors benefit from discounts in sales charges. The goal, the SEC said, is to eliminate errors in the calculation of loads and to assist brokers in calculating those discounts.

The announcement follows a letter that SEC Chairman Harvey Pitt sent to the NASD, the Securities Industry Association, and the ICI. He asked the groups to convene a committee tasked with solving the problem.

The issue "demands swift action by regulators, as well as the focused attention of the mutual fund and brokerage industries to protect the investing public," Pitt said.

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Money Management Executive

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