While neither admitting or denying the charges by NASD, AllianceBernstein Investments Inc. of New York, Scudder Distributors Inc. of Chicago, and Putnam Retail Management Limited Partnership of Boston says they will collectively pay $700,000 to settle allegations that they violated the NASD’s non-cash compensation rules. Charges included the accusations that they improperly provided entertainment at education and training meetings and paid for guest expenses at these events.
Scudder, the distributor of Scudder investment products, said it would pay $425,000 in fines. AllianceBernstein, the distributor of AllianceBernstein LP’s investment products, agreed to pay $100,000, and Putnam, which distributes its own products, said it would pay $175,000.
NASD limits compensations so that point-of-sale incentives won’t affect a broker’s objectivity to find the appropriate investment product for each investor. Non-cash compensations are also limited by NASD, including reimbursements for meals, lodging, and travel expenses related to education and training meetings.
NASD says that from 2001 to 2004, Scudder engaged in three kinds of prohibited non-cash compensations, such as paying for spouses to attend educational events and eat at expensive restaurants, paying for lavish kinds of entertainment at these events, and paying for other activities, such as fishing, golf, and horseback riding.
Putnam, according to NASD, also violated non-cash compensation rules when it paid for transportation and meals for brokers’ guests and spouses at meeting and training meetings and gave away tickets to a Boston Red Sox game, despite advice by legal counsel not to do so.
As for AllianceBernstein, NASD says that the firm paid for guests of brokers to eat at famous New York Restaurants and see Broadway shows.
NASD says the three distributors did not have appropriate compliance systems and procedures in place to make sure that the non-cash compensation rules were followed.
Shepherd Smith and Edwards represents clients who have been the victim of investment fraud by brokers and their firms, and we have helped thousands of investors across the United States recover their financial losses. To schedule a free consultation, contact Shepherd Smith and Edwards today.
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