Alliance, NASD in Talks on Broker Fees

Alliance Capital Management Holding, the fourth-largest publicly traded U.S. fund manager, is in settlement talks with the NASD over undisclosed payments to brokers that may have increased shareholder costs.

Alliance reduced 2004 earnings by $5 million, or 2 cents a share, in anticipation of a settlement, the New York-based company said Tuesday. The reduction, to $2.43 a share from the $2.45 reported in January, won’t affect its fourth-quarter dividend.

Talks with the NASD, formerly known as the National Assn. of Securities Dealers, began March 11, the company said. They concern a practice known as directed brokerage, or steering securities trades and commissions to firms that also sell a company’s funds to investors.

Regulators including the NASD and the Securities and Exchange Commission are concerned that fund companies used directed brokerage to compensate brokers for selling their funds.

The SEC voted in August to ban the practice. Authorities have handed out more than $275 million in penalties related to sales practices.

Alliance, a unit of Paris-based financial services company AXA, was one of 16 fund companies identified in November 2003 as participating in Morgan Stanley & Co.’s Partners Program. Under the plan, fund firms paid higher fees to brokerage companies to have their funds sold, and brokers got paid more for promoting them.

Alliance said in November that it had been subpoenaed by the SEC and the NASD over the trading payments.

In 2003, Morgan Stanley agreed to pay a $50-million settlement with the SEC and the NASD. MFS Investment Management, a Boston-based fund company and a participant in the partners plan, also paid regulators $50 million.

Alliance shares rose 44 cents to $47.70 on the New York Stock Exchange.