NASD (known formerly as the National Association of Securities Dealers) recently fined David Lerner Associates Inc., a Long Island brokerage firm, for running prohibited sales contests, and NASD officials want to ensure there aren’t other cases out there as well.
The Long Island brokerage firm was fined $100,000 for running sales contests that promoted certain David Lerner proprietary mutual funds and other selected products in violation of NASD rules. “The sales contests engaged in by the firm increase the potential for investors to be steered into investments that are in the representatives’ financial interests instead of the best interests of the customers,” said Mary L. Schapiro, vice chairman and president of regulatory policy and oversight for NASD, in announcing the fine and censure.
Prizes for the prohibited sales contests included three- and four-day group travel programs to destinations in Puerto Rico, the Bahamas, Las Vegas and New York, as well as expensive merchandise like large-screen televisions. The total value of the awards was $700,000.
The compliance action taken against Lerner is the third of its kind taken against member firms by NASD. [And] writing in the spring 2004 issue of The Journal of Investment Compliance NASD enforcement officials report that “NASD is in the process of examining over 20 broker-dealers” to review their compliance with rules that prohibit brokerage firms from rewarding cash or non cash compensation (including group travel programs) to brokers for selling specific funds or annuities.
For more information on NASD and prohibited sales contests see the June issue of& Incentives.