Pru retail brokerage settles charges over mutual fund pricing

Unit to pay nearly $11M to close Finra action; B-D platform allegedly failed to place orders in a timely fashion

Dec 26, 2012 @ 3:33 pm

By Liz Skinner

Prudential, mutual funds, Prucor
+ Zoom
((Photo: Bloomberg News))

Pruco Securities LLC will pay more than $10.7 million to customers who placed orders for mutual fund shares via facsimile or through the mail and allegedly received inferior pricing over a seven-year period.

The Financial Industry Regulatory Authority Inc. said Pruco, part of Prudential Financial Inc., priced more than 850,000 paper orders from late 2003 through June 2011 one or two days after they were received. The orders, which were handled by a Pruco retail brokerage platform called Command, should have been priced on the day the orders were received as long as it was before 4 p.m.

Newark, N.J.-based Pruco also will pay a $550,000 fine for pricing errors and for having inadequate supervisory systems and procedures, Finra said.

“Pruco's inadequate supervision and pricing system resulted in thousands of customers receiving inferior prices for more than seven years,” said Brad Bennett, Finra's enforcement chief. “Broker-dealers must ensure that their systems provide customers with accurate pricing for all products that the firms offer.”

Employees at Command mistakenly thought they could use “best efforts,” or up to two business days, to process these funds orders, Finra said. About 37,000 accounts for 34,000 customers will receive restitution, plus interest. The company is still calculating restitution for about 3,240 additional customers who will get money back after Pruco finishes its pricing review.

Apparently, Pruco discovered the pricing issue after Command personnel were asked about a fax order that wasn't executed until the day after it was received. Finra said it took into consideration that the firm reported the pricing issue to the regulators and has already made changes to its policies and procedures.

Prudential spokesman Bob DeFillippo said that after the company discovered the pricing delay and reported it to Finra, it also moved quickly to make sure it couldn't happen again, and to identify customers who deserve restitution.

“The errors were not always in our favor, but of course we're not trying to recover anything,” Mr. DeFillippo said. “Our intent is to make sure anyone harmed is made whole, plus interest.”

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Special Needs Special Planning

Financial adviser John Nadworny’s path to help his son James led to his business focus on special needs planning.

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry

After a decade of litigation, fees are lower and retirement plans are more transparent. But have the lawsuits gone too far?

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

With margins crashing, broker-dealers look to merge: report

Increased regulation is straining profit margins among broker-dealers, sending many of them into the arms of their bigger brethren.

Hackers may have profited from SEC breach

The hack of the agency's Edgar filing system occurred in 2016, but the regulator didn't conclude until last month that the cybercriminals may have used their bounty to make illicit trades.

Top 10 financial firms ranked by investor satisfaction

Find out which firm took the top slot for overall investor satisfaction for the second year in a row.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print