Probe Focuses on Gifts to Advisers
Securities regulators are investigating whether mutual-fund companies directed trades toward securities firms that furnished them with "excessive" gifts, potentially violating the fund advisers' fiduciary role and rules governing broker-dealers.
Officials at the Securities and Exchange Commission and the National Association of Securities Dealers say they have uncovered evidence of at least one brokerage firm lavishing trips and other gifts on a fund adviser. People familiar with the matter identified the brokerage firm as Jefferies & Co., and the mutual-fund adviser as Fidelity Investments. The SEC's enforcement division is investigating both companies, these people said, and the SEC and NASD have also launched a broader "fact-finding" inquiry to determine whether such behavior was widespread.
Jefferies recently dismissed its sales trader responsible for the Fidelity account, according to a person familiar with the matter. The dismissal, which was reported by Bloomberg News, was related to improper expenses. A Jefferies spokesman declined to comment, citing firm policy.
Anne Crowley, a spokeswoman for Fidelity, declined to comment on whether the company was being looked at in this particular probe but said the company has "various policies and procedures that outline appropriate business conduct and that includes polices on acceptance of gifts and gratuities."
Fidelity, the nation's largest mutual-fund company, so far has escaped regulatory action by the SEC related to improper practices. While the SEC has asked the company for documents in various probes, Fidelity hasn't been charged with wrongdoing.
The SEC and the NASD are trying to determine to what extent such gift-giving occurs.
"We are looking at about two dozen [brokerage] firms where we have indications that lavish entertainment and gifts may have been given," said Mary Schapiro, vice chairman of the NASD.
Mutual-fund companies have come under fire recently for a variety of conflicts of interest and for allowing rapid, short-term trading of fund shares, known as market timing. At issue here are the huge commissions generated by mutual-fund companies. Regulators want to know whether mutual-fund advisers directed securities trades -- and the lucrative commissions they produce -- to brokerage firms that provided them with gifts. Such a move could violate an adviser's fiduciary duty to steer trades to firms based on what's best for fund investors.
"Our concern is whether the self-interest of gift recipients may have trumped the best interests of investors," said Lori Richards, director of the SEC's office of compliance inspections and examinations.
It is the latest regulatory probe to examine potential conflicts of interest between mutual-fund and brokerage firms. Regulators are already investigating a host of practices, including indirect payments fund companies make to brokerage firms in exchange for being included in a firm's lineup of available funds. And the SEC recently banned the long-held practice of fund-management companies directing trades and commissions to brokerage firms as compensation for selling and prominently placing their fund shares.
The issue in this inquiry is whether brokerage firms violated NASD rules that prohibit giving more than $100 a year in gifts and whether fund advisers violated their duty to make decisions in the best interests of fund investors. Investment advisers must direct stock trades to brokerage firms that can offer the best price and best execution, not to those that give the best perks, said Ms. Richards.
Regulators launched the probe after a NASD examination uncovered evidence that a brokerage firm may have given "lavish" gifts to a fund adviser. Among the gifts regulators have uncovered are tickets to sporting events, such as Wimbledon and the Super Bowl, and a $4,000 case of wine. People familiar with the matter said regulators have found an increase in trades steered to a firm that gave gifts to a fund adviser.
SEC and NASD officials said it is too early to know whether such gift-giving is widespread but said early indications suggest it is more than an isolated instance.
SEC和NASD调查经纪商送礼之风
美国证券业监管部门正在对经纪商展开调查，以查明他们是否向共同基金顾问赠送诸如超级碗赛门票和整箱的葡萄酒等“过分”礼品，藉此来影响其对基金交易的决策。
美国证券交易委员会(Securities and Exchange Commission)和全国证券交易商协会(National Association of Securities Dealers)的官员称，他们已经发现有经纪商向基金顾问奉送礼品的事例，并就此展开了调查，以确定这种送礼之风是否已广为蔓延。
