Ameriprise Fined for Directed Brokerage Violations

An NASD news release said that the latest action involves violations of NASD’s Anti-Reciprocal Rule, which prohibits firms from favoring the sale of shares of particular mutual funds based on directed brokerage payments.   The events took place when the firm was known as American Express Financial Advisors, according to the announcement.  The Securities and Exchange Commission (SEC) has also sanctioned the firm for related conduct.

According to the news release, NASD found that from January 2001 through December 2003, Ameriprise operated two shelf space (or revenue sharing) programs in which participating mutual fund companies paid a fee for preferential treatment by Ameriprise. That treatment included enhanced access to Ameriprise’s sales force, including participation in conferences and meetings, distribution and display of marketing materials at Ameriprise branches, and in-office visits with Ameriprise registered representatives – all designed to increase sales of those mutual funds.

In addition, Ameriprise promoted the funds on its internal Web site, identifying the mutual funds as “Preferred Providers,” and posted sales literature for the funds as well as information about the funds and their fund managers.  Ameriprise also charged its advisors reduced sales ticket charges for the sale of Preferred Provider funds. 

The mutual fund complexes that participated in these programs paid extra fees for the preferential treatment they received.  Seven of the 24 fund complexes paid their fees for participating in the programs by directing approximately $41 million in mutual fund portfolio brokerage commissions to Ameriprise, NASD said.