Continuing its financial and insurance industry crackdowns, the regulatory body NASD announced July 6 that has fined Hornor, Townsend & Kent Inc. of Horsham, Pa. $325,000 for conducting six illegal sales contests over a two-year period.
Between 2001 and 2003 HTK held national sales contests based on the sale of variable life and annuity products offered by Penn Mutual Life Insurance Company, HTK’s parent company. NASD found that in determining the winners of the sales contests HTK gave exclusive or greater weight to sales of Penn Mutual variable life products than to sales of Penn Mutual’s variable annuity products.
“By favoring the sale of some variable life and annuity products over others, these contests created conflicts of interest that could undermine the broker’s obligation to recommend suitable investments based on the needs of the customer,” said NASD Vice Chairman Mary L. Schapiro.
Rewards for the national contest winners included weekend trips to New York, New Orleans, and Las Vegas; gift vouchers that could be used for personal entertainment or education; and gift cards. The total value of the awards exceeded $200,000.
HTK also conducted sales contests at the branch level that NASD found in violation of its rules. Prizes for these contests included such items as golf trips, tickets to sporting events, dinners, high definition television sets, and other electronic goods.
NASD also sanctioned HTK for having inadequate supervision and procedures in place to ensure compliance with NASD’s non-cash compensation rules.
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