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Merrill, Wachovia fined for late reporting

The NASD Tuesday said it censured and fined 29 securities firms a total of $9.22 million for failing to properly disclose required information about their brokers more than 8,300 times.
/ Source: Reuters

The NASD Tuesday said it censured and fined 29 securities firms a total of $9.22 million for failing to properly disclose required information about their brokers more than 8,300 times.

The regulator also suspended two of the firms, Merrill Lynch & Co. Inc. and Wachovia Corp., from registering new brokers for five business days, because of their many violations and prior regulatory filing histories.

Merrill Lynch was fined the most, $1.6 million, while American Express Financial Advisors Inc. was fined $700,000, Wachovia Securities LLC $650,000 and Prudential Equity Group LLC $550,000.

Brokerages in general must update NASD records within 30 days for regulatory actions, customer complaints, settlements and criminal charges and convictions involving brokers.

The 29 firms agreed to conduct internal audits to monitor reporting and have an officer certify that controls are in place to help ensure timely disclosures. None of the firms admitted or denied wrongdoing.

"These firms and others will understand from the severity of the fines and other sanctions in this case that timely reporting of broker information is a fundamental obligation that cannot be neglected or ignored," said NASD Vice Chairman Mary Schapiro in a statement.

Morgan Stanley was fined $2.2 million and banned from registering brokers for five days as part of the same investigation.

The NASD was formerly known as the National Association of Securities Dealers.

Widespread failures
The NASD said that, between January 2002 and March 2004, each of the 29 firms failed to make at least 25 percent of their required disclosures on time.

Such failures can make it harder for investor clients to check brokers' backgrounds through the NASD's BrokerCheck.

Merrill was responsible for 1,420 late disclosures, while American Express had 770, Wachovia 610 and Prudential 490, the NASD said. Morgan Stanley had been responsible for more than 1,800 at the time it settled, it said.

ING Financial Partners Inc., which was fined $200,000, had the biggest failure rate, 77 percent, reflecting 160 late disclosures, the NASD said.

Merrill Lynch spokesman Mark Herr said his firm was "not happy that there have been problems with the timeliness of some reporting. We are changing our system so this problem does not arise again."

American Express spokeswoman Marie Davis said her firm has improved its supervision and controls.

"We are absolutely committed to full compliance," she said.

Wachovia did not immediately return a call seeking comment.