Smith Barney, Lehman Bros. Must Give Refunds

Leading brokerages Smith Barney Inc. and Lehman Bros. Holdings Inc. are refunding more than $5.6 million to customers who were improperly charged fees for cashing in mutual fund shares, the regulatory arm of the National Assn. of Securities Dealers said Wednesday.

NASD Regulation ordered the two New York-based firms to make the refunds and censured and fined them $250,000 each.

The self-policing group said more than 15,700 customer accounts were affected by the improper practice of charging commissions where none were allowed on mutual fund redemptions. NASD Regulation investigators said the practice began in October 1990 at the former Shearson Lehman Bros. and continued until 1995. Smith Barney acquired most of Shearson’s retail operations in 1994 and Lehman Bros. became a separate entity.

In a settlement with NASDR, the two firms neither admitted nor denied the allegations.

Lehman Bros. declined to comment.

Smith Barney said in a statement that as a result of an error, it charged commissions to some customers for mutual fund redemptions from Aug. 1, 1993, through Aug. 28, 1995.

The firm said the faulty charges occurred in a ticket-processing system in 7,100 mutual fund transactions out of a total of more than 2 million during the two-year period.