finra

FINRA

 

For Release:
Contacts:
Thursday, October 26, 2006
Nancy Condon (202) 728-8379
Herb Perone (202) 728-8464

 



McLaughlin, Piven and Vogel Securities Agrees to Repay Customers Overcharged for Transferring Accounts

Washington, D.C. — NASD today announced that McLaughlin, Piven and Vogel Securities, Inc. (MPV) of New York has agreed to pay restitution to customers who were charged excessive and unreasonable fees in connection with the transfer of their brokerage accounts to other broker-dealers through the Automated Customer Account Transfer System (ACATS). NASD has identified more than 1,500 customers who were overcharged.

ACATS is administered by the National Securities Clearing Corporation. It was designed to expedite the transfer of customer accounts between participants in a registered clearing agency, to alleviate the demands of manual processing of account transfers on firms and to reduce costs.

NASD also fined MPV $50,000 and ordered the firm to retain an independent consultant to determine the amount of restitution due customers and to review and make recommendations concerning the adequacy of the firm's current policies, systems, procedures and training concerning compliance with NASD's rules relating to charges for services performed.

"Fees and charges assessed by firms must be reasonable and, in the case of account transfers, bear a relationship to the actual cost of the services provided," said James S. Shorris, NASD Executive Vice President and Head of Enforcement. "In this case, the firm attributed a portion of the ACATS fees it charged - as much as $295 - to its costs of investigating brokers whose customers had left the firm. This was an utterly improper assessment of an ACATS fee and was excessive, given that MPV was charged as little as $35 by its clearing firm to process these account transfers."

NASD sampled more than 1,600 registered firms and found that ACATS fees imposed on customers typically run no higher than $50, with the firm retaining $25 or less of that fee.

NASD rules require that charges for services be "reasonable and not unfairly discriminatory between customers." Additionally, NASD has advised registered firms, through Notices to Members, that charges for services must be fair under the relevant circumstances, that each member "should be prepared to justify that its prices are fair as to each customer and transaction" and that ACATS fees should be related to the actual costs of the account transfers.

NASD found that between April 2002 and September 2006, MPV violated NASD's rules by charging more than 1,500 customer accounts excessive and unreasonable account transfer fees. Between April 2002 and mid-April 2006, the firm charged customers $295 per account transferred. MPV kept, after clearing firm charges, between $235 and $260 per account. Between mid-April and September 2006, the firm charged customers $195 per account transferred and retained, after clearing charges, $135 per account.

MPV charged the high transfer fees, in part, to offset the firm's costs of investigating departing brokers, to determine whether they had made false statements to persuade customers to transfer their accounts in violation of the departing brokers' employment agreements. NASD found that the respective $295 and $195 transfer fees were excessive, unreasonable and largely unrelated to MPV's actual costs of processing account transfers through ACATS. Any costs associated with investigating possible impropriety by departing brokers were unrelated to MPV's actual costs of effecting account transfers and may not be shifted to the customers.

In settling with NASD, MPV neither admitted nor denied the allegations, but consented to the entry of NASD's findings.

Last month, an NASD task force issued recommendations for expediting and streamlining transfers of customer accounts from one brokerage firm to another through ACATS. The recommendations include a number of operational enhancements and regulatory measures, which are detailed in the Report of the Customer Account Transfer Task Force. The report is available online at www.nasd.com. The task force included operations experts from various sectors of the brokerage industry to ensure input from firms with differing business models.

Investors can obtain more information about, and the disciplinary record of, any NASD-registered broker or brokerage firm by using NASD's BrokerCheck. NASD makes BrokerCheck available at no charge to the public. In 2005, members of the public used this service to conduct more than 4.3 million searches for existing brokers or firms and requested more than 194,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to BrokerCheck at www.nasdbrokercheck.com. Investors can also access this service by calling (800) 289-9999.

NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at www.nasd.com.