NASD also found that Securities America failed to adequately supervise Bullock’s communications with his union-sponsored retirement plan clients to ensure that Bullock disclosed his additional compensation to those clients, according to the announcement. NASD has charged Bullock with improperly receiving directed brokerage commissions and other compensation of more than $280,000 and with misrepresenting and failing to disclose this compensation to his retirement plan clients.
NASD said Bullock failed to disclose his additional compensation at the same time he was advising his clients to maintain or include the fund company’s mutual funds in the retirement plans they offered.
Previous NASD actions involved firms receiving directed brokerage in exchange for promoting specific mutual funds to the investing public and among their own brokers. This is the first case in which the fund company directed brokerage specifically for the benefit of an individual broker, NASD said.
NASD found in its settlement with Securities America, and alleged in its complaint against Bullock, that Bullock negotiated an arrangement with a mutual fund company to have thousands of dollars of brokerage commissions directed to him every month and used the additional compensation to hire a sales assistant, formerly employed by the fund company, to help him find new retirement plan clients. Securities America approved the arrangement and from 2002 through 2003 received $420,000 in directed commissions from the fund company for Bullock’s benefit, paying Bullock $262,500 and retaining $157,500.
NASD alleged that while Bullock was sharing in commissions generated by the fund company, all but one of Bullock’s 15 union retirement plan clients included at least one mutual fund from the fund company in their plans. In addition, in one instance, NASD said Securities America approved one of Bullock’s misleading communications to a client, despite its involvement in the directed commission arrangement that resulted in Bullock’s conflict of interest.
In addition to receiving over $260,000 in directed brokerage payments, Bullock also requested and received a $20,807.32 check directly from the fund company in 2002 to reimburse him for some of the same expenses for which he was receiving directed commissions. The complaint alleges that Bullock concealed from Securities America that he received these funds.
Securities America neither admitted to nor denied the charges against it.
Investors can obtain more information about, and the disciplinary record of, any NASD-registered broker or brokerage firm by using NASD’s BrokerCheck at http://www.nasdbrokercheck.com.