NASD Fines 2 Units of Prudential Financial

The National Assn. of Securities Dealers on Thursday said it fined two Prudential Financial Inc. units $2 million and ordered them to refund more than $9.5 million to customers for improper sales of variable and other annuities.

The regulator said it penalized Prudential Equity Group Inc. and Prudential Investment Management Services after employees violated NASD rules and New York state insurance regulations governing hundreds of replacement sales of annuity contracts from November 1998 through June 2002.

“The procedures ... exist to protect investors from unsuitable recommendations and hasty decisions,” NASD Vice Chairman Mary Schapiro said in a statement. “Because of the complexities of variable annuities, short-cutting the rules and regulations governing sales cannot and will not be tolerated.”

The NASD said the Prudential units neither admitted nor denied the charges in concluding the settlement.

“Prudential discovered this matter and promptly notified the proper regulators,” Prudential spokesman Bob DeFillippo said. “We have fully cooperated with the regulators. We have also established a remediation program, which has already given more than $8 million in benefits to our customers.” The $8 million is part of the $9.5-million refund, he said.

The NASD said there was an “organized effort” for employees to have customers sign undated documents and then fill in dates later to make it seem customers were contacted twice.

Prudential Financial shares Thursday closed up 8 cents at $43.48 on the New York Stock Exchange.