NASD Levies Fines on 29 Brokerages
The NASD said Tuesday that it censured and fined 29 securities firms, including some of Wall Street’s best-known companies, a total of $9.2 million for failing to properly disclose disciplinary and other required information about their brokers more than 8,300 times.
The NASD also suspended two of the firms, Merrill Lynch & Co. and Wachovia Corp., from registering new brokers for five business days because of their many violations and previous regulatory filing problems.
Merrill Lynch, the largest U.S. brokerage, was fined the most, $1.6 million. American Express Co.’s American Express Financial Advisors Inc. was fined $700,000 and Wachovia Securities, $650,000. Prudential Financial Inc.’s Prudential Equity Group was fined $550,000.
The NASD, once known as the National Assn. of Securities Dealers, said each of the 29 firms failed to make at least 25% of required disclosures on time from January 2002 to March 2004. ING Group’s ING Financial Partners Inc., which was fined $200,000, had the biggest failure rate, 77%.
The amount of the fines was determined by factors including the number of alleged reporting violations and how late the reports were filed.
Brokerages in general must update NASD records within 30 days for regulatory actions, customer complaints, settlements and criminal charges and convictions involving brokers.
“Anytime required information like this is not available to customers, they are harmed, because they need current, accurate information to help them make decisions on who to do business with,” said Barry Goldsmith, the NASD’s executive vice president of enforcement.
He said the NASD was also investigating other brokerages for similar violations.
The companies named by the NASD on Tuesday agreed to conduct internal audits to monitor reporting and have officers certify that controls were in place to help ensure timely disclosures. None admitted or denied wrongdoing.
Morgan Stanley in July was fined $2.2 million and banned from registering brokers for five days in a settlement stemming from the same investigation.
Late disclosures can make it harder for investors to review the backgrounds of about 665,000 registered brokers in nearly 5,300 firms through the NASD’s BrokerCheck. Investors used the service more than 2.8 million times in 2003.
“Some firms treated disclosure of broker data as an administrative detail rather than a fundamental obligation of self-regulation,” NASD Vice Chairwoman Mary Schapiro said.
Merrill was responsible for 1,420 late disclosures. American Express had 770; Wachovia, 610; and Prudential, 490, the NASD said. ING had 160 late disclosures.
Morgan Stanley had more than 1,800 at the time it settled.
Katherine Malfa, an NASD vice president in enforcement, said that Merrill was fined a combined $315,000 by the NASD and the New York Stock Exchange in 2000 and 2002 for other late filings, and that Wachovia was fined $250,000 this year by the NYSE.
Merrill Lynch spokesman Mark Herr said the company was “changing our system so this problem does not arise again.”
Wachovia Securities declined to comment.
American Express has improved its supervision and is “absolutely committed to full compliance,” spokeswoman Marie Davis said.
