NEW YORK, Feb. 26 — Axa Advisors LLC, the American brokerage arm of French financial giant Axa SA, has agreed to pay $250,000 and make restitution to investors to settle allegations that it overcharged customers who moved their money from one mutual fund to another.
NASD alleged in a formal complaint that Axa brokers failed to tell their customers that two large mutual fund companies were offering to waive the commission charges — called front-end loads — for customers who transferred money from other mutual funds that also charged such fees. Instead, the Axa brokers deducted the usual commissions, improperly netting the firm $700,000 between 2000 and 2003, NASD said.
The case is the first of its kind brought by the regulatory group formerly known as the National Association of Securities Dealers, but it may not be the last, said NASD enforcement chief Barry R. Goldsmith. “We don’t believe it’s limited to this particular firm,” he said.
NASD said Axa failed to waive commissions on $18 million its customers moved into funds run by Eaton Vance Distributors Inc. and the Pacific Investment Management Co. (Pimco).
Many other fund companies run similar promotions — usually known as net asset value transfer programs because they promise customers that they will not lose assets during the switch. NASD is concerned that other brokers also are losing track of and not telling their customers about these offerings, Goldsmith said. There is no evidence that Axa’s failures were deliberate, he said.
As is customary, Axa neither admitted nor denied wrongdoing. But the firm said in a statement that it “regrets that any of its mutual fund customers unintentionally may not have been given the proper prices for mutual funds they purchased when they were eligible” for such privileges. “We will make full restitution to all such customers.”
This is not the first time regulators have accused brokers of not giving customers the proper discounts. Last year, NASD and the Securities and Exchange Commission found that dozens of brokers failed to give customers who invested large amounts of money in mutual funds the discounts — called breakpoints — that they were entitled to.
NASD is particularly concerned about the issue right now because the scandals that have wracked the mutual fund industry since September have prompted many investors to change fund companies.
Axa Advisors, which has about 7,000 brokers in 65 offices nationwide, promised to conduct a broad review to prevent similar mistakes. Axa Advisors is separate from Axa’s mutual fund arm, Alliance Capital Management LP, which agreed in December to pay $600 million in fines and fee discounts to settle state and federal allegations that it allowed hedge funds and other large investors to engage in predatory short-term trading — called market timing — at the expense of its other mutual fund customers.
Reported By TechNews.com, http://www.TechNews.com
(20040227/WIRES /)
