The New Hampshire Bureau of Securities Regulation recently fined Morgan Stanley DW Inc. $435,000 for improper sales and business practices. Among other practices, the bureau focused on the company’s "improper use of sales incentives."
In the consent agreement reached with Morgan Stanley, the bureau cited the company with holding sales campaigns that focused on certain proprietary funds, "while offering compensation schemes that are not permissible under state and federal securities guidelines." One sales campaign was a "Steak-a-thon," where agents were awarded steaks for sales of certain Morgan Stanley proprietary funds.
The same New Hampshire office is also seeking $17.5 million in penalties from American Express Co., alleging that it illegally steered clients towards under-performing proprietary funds. Some of the sales contests cited include a free one-year lease of a Mercedes Benz automobile for advisors who sold the most American Express funds.
On a national level, NASD (formerly the National Association of Securities Dealers) regulations prohibit broker-dealers from rewarding noncash compensation for sales of specific funds or annuities, and has cracked down on illegal sales contests over the past two years. According to a spokesman, NASD will be reexamining its sales contest regulations in meetings later this spring.
For information on the NASD go on to its Web site at www.nasd.org.