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Broker gifts to mutual fund execs probed

U.S. market regulators are looking into gifts of Super Bowl tickets, private jet rides, wine and expensive golf outings by brokerage firms to mutual fund executives, officials said Tuesday.
/ Source: Reuters

U.S. market regulators are looking into gifts of Super Bowl tickets, private jet rides, wine and expensive golf outings by brokerage firms to mutual fund executives, officials said Tuesday.

In another potential embarrassment for Wall Street and the $7.5 trillion fund industry, the Securities and Exchange Commission said it and brokerages watchdog NASD are conducting a "broad-based inquiry" involving 20 brokerage firms.

The probe is looking into whether "some brokerage firms may have given excessive gifts to employees of mutual fund advisers in an effort to curry their favor," said an SEC spokesman.

NASD rules prohibit expensive gift-giving in certain circumstances. SEC rules state that mutual funds must disclose conflicts of interest including payments that might affect their decisions, the commission said.

"The concern is whether the self-interest of gift recipients trumped the best interest of investors," said SEC spokesman John Nester.

Mutual fund companies and former fund managers over the past year and a half have had to pay out more than $2 billion in fines and other costs to settle charges involving improper trading of fund shares and other abuses.

The SEC is also probing other areas including ties between funds and the brokers that handle their portfolio trades, market their shares to investors, provide them with research and sell them many other services.