NASD orders 8 firms to pay over $610,000

June 30, 2004|Associated Press

NEW YORK -- Regulators yesterday ordered eight brokerage firms, including some of Wall Street's biggest houses, to pay a total of more than $610,000 to settle charges that they improperly traded municipal bonds and failed to ensure that customers received a fair price for their bonds.

The National Association of Securities Dealers, the brokerage industry's self-policing organization, announced the settlements in which the firms are paying $310,000 in civil fines and $300,000 in restitution to customers for allegedly unfairly pricing bonds. The firms neither admitted nor denied wrongdoing in the settlements.

Regulators have been intensifying their scrutiny of the $1.9 trillion municipal bond market, which draws investors partly because of the tax benefits -- but which critics say lacks price transparency. The Securities and Exchange Commission is examining whether big Wall Street firms engaged in deceptive or unfair practices in auctions in the market for corporate and municipal bonds.

In the NASD action, the largest penalty was levied on UBS Financial Services Inc., which was fined $100,000 and ordered to pay $100,666 in restitution.

The other firms are:

First Trust Portfolios, $60,000 fine, $58,680 in restitution;

Merrill Lynch Inc., $55,000 and $54,527;

Charles Schwab & Co., $30,000 and $30,869;

Wachovia Securities, $20,000 and $19,486;

Morgan Stanley Inc., $20,000 and $18,312;

Edward Jones, $15,000 and $10,181; and

Prudential Equity Group, $10,000 and $7,306.

The NASD found that some customers had received below-market prices when selling their municipal bonds to the firms, which then resold the securities -- sometimes in the same day -- often at significantly higher prices.

The NASD is investigating the conduct of other brokers involved in these transactions.