NASD Issues New Guidelines to Fort Misleading EIA Marketing NASD, 8/1/05 The NASD issued a notice to its members regarding their responsibility to supervise the sale by their associated persons of equity-indexed annuities (EIAs) that are not registered under federal securities laws. The NASD is mainly concerned about the manner in which associated persons are marketing and selling unregistered EIAs. Some sales materials for unregistered EIAs have been found to not fully describe the features and risks of the product. These annuities may be appropriate for some, but are not suitable for all investors. www.nasd.com
Making Lemonade Investment News, 03/21/05 Wall Street’s settlement over research irregularities of $1.4 billion in 2003 is indirectly funding a new financial-education series. The educational series is being financed by the Investor Protection Trust which has received $27.5 million from the settlement for this project. The new Public Broadcasting Service financial-education series is called “Money Track.” www.investmentnews.com SEC Forces Funds to Disclose Manager Pay Money Management Executive, 2/8/2005 The SEC is requiring mutual fund companies to disclose how they compensate portfolio managers and to report managers’ investments in the funds they oversee. Registration documents will now include information about managers’ pay and investments they personally own. The goal is to better align the interests of the managers’ with long-term shareholders. www.mmexecutive.com SEC Examines Rebate Paid to Large Funds Wall Street Journal, 1/06/05 The SEC is investigating mutual fund and hedge fund managers' rebates on stock trading commissions that should be going back to investors, but instead could be pocketed by the managers. The rebates are not illegal as long as they are disclosed and benefit the fund holders. This investigation stemmed from the improper gifting that recently made headlines on Wall Street. www.wallstreetjournal.com NASD Collected $102 Million in Fines in 2004 Money Management Executive, 01/03/05 The NASD filed 1,360 enforcement actions and collected $102 million in fines in 2004. 830 people were barred or suspended. 120 disciplinary actions were brought against securities firms for improper mutual fund sales and trading. 15 firms were fined $21.5 million for failing to provide breakpoint discounts to their clients. Also, the NASD launched the NASD Investor Education Foundation that gives investors information on the confusing subject of variable annuities. www.mmexecutive.com Fund Companies Must Expand Offerings Beyond Funds Money Management Executive, 12/28/04 Diversifying is the new way mutual fund companies will be able to stay afloat in what is expected to be a flat market. Traditional mutual funds will not be able to support an ideal portfolio on their own any longer, and firms will begin to cut back on the number of funds they offer, seeking only funds with the best performance and largest assets. Commission-driven sales are likely to be replaced with fee-based practices. www.mmexecutive.com Wall Street Still Settles Guilt Free Wall Street Journal, 11/23/04 Massachusetts regulators are attempting to prevent companies from settling charges without admitting to or denying their guilt. Companies defend their absence of admission, citing they do so in order to prevent an increase in their insurance costs or from leaving open a loophole that allows them to be sued by investors. MA regulators want to see more admission of guilt to show that Wall Street is getting serious about restoring credibility. www.wallstreetjournal.com SEC set to vote broker-dealer-exemption rule Investment News, 11/22/04 Soon broker-dealers could be exempt from being regulated by the SEC as investment advisers. The SEC is attempting to draw a line between advisers and brokers to better serve investors who were hurt from practices uncovered in the recent mutual fund scandal. Investors would benefit from this rule because the broker-dealer who acts as their adviser will not be rewarded financially for selling plans that earn the broker additional commissions. www.investmentnews.com Schwab is taking heat over ‘Merrill Lynch rule' Investment News, 11/22/04 Merrill Lynch’s Retirement Investment Advisors are upset with the company’s support of the new proposed SEC rule (see “SEC set to vote broker-dealer-exemption rule). RIAs believe that broker-dealers who act as advisers should have to register with the SEC as one. Opponents believe that two sets of rules will confuse investors, not help them. Proponents of the new rule feel that it will level the playing field and give investors a choice of who they receive advice from. www.investmentnews.com Soft dollars win support Investment News, 11/22/04 The NASD task force concluded from their research that soft-dollar arrangements should be left in place. Soft dollar practices benefit clients of smaller investment advisers because the advisers can’t afford to house their own research staff or fund hard-dollar payments for research. Soft-dollars are currently collected from shareholder brokerage commission. But the NASD did recommend that the SEC narrow what type of research is paid for by using soft-dollars. www.investmentnews.com
