TheStreet.com: NASD Fines Brokerages Over Muni Bond Purchases

By Matthew Goldstein
TheStreet.com Senior Writer
6/29/2004 2:28 PM EDT

Securities regulators ordered eight brokerages to pay $610,000 in penalties for failing to offer a fair price to some municipal bond customers.

The NASD found that the firms offered the customers a below-market price for the bonds, in violation of municipal bond securities rules.

The sanctioned firms include Charles Schwab, Edward Jones, First Trust, Merrill Lynch, Morgan Stanley Prudential, UBS and Wachovia. The firms collectively were ordered to pay $310,000 in fines and $300,000 in restitution.

"Unlike a traditional markup case involving unfair profits to the dealer, these cases involve dealers who failed to take reasonable steps to obtain fair prices for their customers," says Mary Schapiro, NASD vice chairman.

The NASD determined that the brokerages had short-changed customers because the bonds were subsequently resold on the same day for far higher prices.

The brokerage firms, in settling with the NASD, neither admitted nor denied the allegations.