Prudential to Pay $382,000 to End Overcharging Allegations

Prudential Securities Inc. agreed to pay $382,000 to settle charges that it didn’t have proper systems in place to catch a broker who allegedly caused investors to pay higher mutual fund commissions, regulators said Thursday.

The Securities and Exchange Commission accused Prudential of “a serious supervisory failure” by not having sufficient systems from 1998 to 2000 to enforce policies for the sale of different mutual fund classes.

Prudential neither admitted nor denied the charges. The brokerage had been a unit of Prudential Financial Inc., but the insurance giant this year agreed to merge the brokerage with Wachovia Securities.

The probe centered on former broker Robert Ostrowski, who worked in the firm’s Wilkes-Barre, Pa., branch and was one of Prudential’s top mutual fund salespeople, according to the SEC.

He was accused of selling Class B fund shares to customers, while failing to disclose that if they purchased Class A shares they were eligible for discounts based on the size of their mutual fund purchases.

Ostrowski received $51,500 in excess commissions from his improper sales while Prudential made about $63,000, the commission alleged.

“At the end of the day, we believe Bob will be vindicated,” Ostrowski’s attorney said.

Prudential’s settlement calls for it to pay a $300,000 fine. It also will hand over an additional $82,000 that will be returned to investors who were harmed.