Lavish Gifts to Fund Executives Probed

The Securities and Exchange Commission and the NASD are investigating whether brokers gave lavish gifts to mutual fund executives to curry favor from the companies.

“We have indications that the gifting that has taken place in attempts to win business include Super Bowl tickets, golf outings, expensive wine, and expensive trips or junkets,” SEC spokesman John Nester said Tuesday. The probe will focus on whether fund managers sent trades to brokers who gave costly gifts, violating the duty to put investors’ interests first.

The investigation is the latest blow to the mutual fund industry’s image, which has been tarnished by a series of scandals over the last year.

“Our concern is that a mutual fund must act solely in the best interests of its investors,” said Lori Richards, director of the SEC’s Office of Compliance, Inspections and Examinations.

The inquiry will focus on NASD rules barring brokers from giving firms or their employees gifts worth more than $100, and requiring mutual fund companies to disclose gifts, the SEC’s Nester said.

“The concern is whether the gifts are trumping investor interests,” Nester said. He declined to say which firms are involved in its inquiry. NASD spokeswoman Nancy Condon said about two dozen firms are under review. NASD is formerly the National Assn. of Securities Dealers.

New York-based brokerage firm Jefferies Group Inc. fired sales trader Kevin Quinn last month after it reviewed his expense reports and found he violated a policy “concerning personal utilization of company property and funds,” according to regulatory records.

Quinn handled the orders of Fidelity Investments, the biggest mutual fund company. Fidelity was Jefferies’ biggest client during the last 12 months, according to SEC data analyzed by Georgeson Shareholder Analytic’s StreetSight unit.

Quinn, who worked at Fidelity’s Boston office, couldn’t be reached for comment. His lawyer, Mike Tuteur of Epstein Becker & Green, didn’t return phone calls. A Jefferies spokesman also declined to comment.

Fidelity declined to discuss the probe.