NASD Fines Four Firms for Supervisory Failures Relating to Mutual Fund Sales Charge Waivers

NASD announced today that it has imposed fines totaling $850,000 against four firms-- Edward D. Jones & Co., L.P. of St. Louis ($250,000), RBC Dain Rauscher Inc. of Minneapolis ($250,000), Royal Alliance Associates, Inc. of New York ($250,000), and Morgan Stanley DW Inc. of New York ($100,000) -- for failing to have adequate supervisory systems and procedures to identify opportunities for investors to purchase Class A mutual fund shares at net asset value (NAV), or without a front-end sales charge.

Each firm was ordered to provide remediation to thousands of eligible clients who qualified for, but did not receive, the benefit of available NAV transfer programs. Based on estimates provided by each firm, Edward Jones will pay $25 million, plus interest; RBC Dain Rauscher will pay $6.8 million, plus interest; Royal Alliance will pay $1.6 million, plus interest; and Morgan Stanley will pay $10.4 million, plus interest. Each firm is required to retain a third party examiner to oversee the remediation process.

NASD found that each firm during the relevant period failed to have systems reasonably designed to ensure that customers received NAV pricing when appropriate. As a result, certain investors purchased Class A shares and incurred front-end sales charges that they should not have paid, or purchased other mutual fund share classes that subjected them to higher fees and the potential of contingent deferred, or back-end, sales charges.