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Brokerages, mutual fund paying $34 million fine

SHARE Brokerages, mutual fund paying $34 million fine

WASHINGTON — Fourteen brokerage firms, including six subsidiaries of embattled insurance company American International Group Inc., and a mutual fund distributor are paying fines totaling more than $34 million in deals with industry regulators over payments they received to push certain mutual funds, it was announced Wednesday.

The companies have agreed to pay the civil fines in settlements with the National Association of Securities Dealers, the brokerage industry's self-policing organization. The NASD alleged that the brokerages received payments from mutual fund companies in exchange for preferential treatment for the funds, creating a potential conflict of interest.

The companies neither admitted nor denied wrongdoing in agreeing to pay the fines, which ranged from $286,415 for Advest Inc. to $6.6 million for Royal Alliance Associates Inc., one of the AIG subsidiaries. The other five AIG units are Advantage Capital Corp., FSC Securities Corp., Sentra Securities Corp., Spelman & Co. Inc. and SunAmerica Securities Inc. The six firms comprise AIG's retail securities brokerage network.

"Our (brokerage firms) cooperated fully with the NASD throughout its examination," said John Pluhowski, a spokesman in Houston for AIG Retirement Services. "We are pleased that we have reached a settlement with the NASD on this matter."

AIG shares fell 28 cents to close at $54.95 on the New York Stock Exchange. Its shares have ranged from $49.91 to $74.98 over the past 52 weeks,

The NASD has in recent months concluded a number of similar settlements with brokerage firms, some in concert with the Securities and Exchange Commission, as part of an industrywide crackdown on alleged abuses in the trading and marketing of mutual funds.

At issue are alleged violations involving "shelf space" arrangements between fund companies and brokerage firms, under which the funds pay brokers for slots on lists of recommended buys for customers. The brokerage firms are accused of violating an NASD rule that prohibits firms from favoring the sale to their customers of shares of certain mutual funds based on payments they receive from fund companies.

AIG, the biggest U.S. insurance company, recently restated its earnings by nearly $4 billion and is the subject of multiple government probes into whether it manipulated its finances to boost the appearance of its financial health.

The mutual fund distributor AllianceBernstein Investment Research and Management Inc., based in New York, agreed to pay $3.98 million.

The brokerage firms agreeing to settlements, the cities where they are based and the fines they are paying are:

Royal Alliance Associates Inc., New York, $6.6 million.

H.D. Vest Investment Services, Irving, Texas, $4.01 million.

Linsco/Private Ledger Corp., Boston, $3.6 million.

Wells Fargo Investments LLC, San Francisco, $2.97 million.

SunAmerica Securities Inc., Phoenix, $2.5 million.

FSC Securities Corp., Atlanta, $2.4 million.

Securities America Inc., Omaha, $2.4 million.

RBC Dain Rauscher Inc., Minneapolis, $1.7 million.

McDonald Investments Inc., Cleveland, $1.5 million.

AXA Advisors LLC, New York, $900,000.

Sentra Securities Corp. and Spelman & Co. Inc., both based in Phoenix (joint fine), $780,000.

Advantage Capital Corp., Atlanta, $450,000.

Advest Inc., Hartford, $286,415.