Upon American Express Financial Advisors, Inc.
March 29, 2004
Connecticut State Banking Commissioner John P. Burke signed a Consent Order today which authorized a fine of $100,000 to be levied upon American Express Financial Advisors Inc. by the Connecticut Department of Banking. The settlement is the result of an investigation into the possible violations of the Connecticut Uniform Securities Act by American Express Financial Advisors Inc.
The Department of Banking's Securities and Business Investments Division (the "Division") determined that American Express implemented a wrap exit/purchase policy which penalized its representatives for moving clients' funds, held less than thirty-six months, from a mutual fund to a wrap account. A wrap account is an investment account and financial services product which charges a fee based on a percentage of assets under management. American Express penalized its representatives $1,000 per occurrence for violating the policy.
This policy, which was not communicated to American Express clients, created an atmosphere in which American Express registered representatives may have been conflicted when advising clients. This conduct could constitute a violation of the Regulations and even lead to the revocation of the company's registration as a broker-dealer under the Act.
In the process of the investigation, the Division also determined that American Express provided the agency with inaccurate information.
American Express, through the execution of this Consent Order and without admitting or denying the Commissioner's allegations, has agreed to an administrative fine of $100,000 and a reimbursement to the agency of $10,000 for costs pursuant to the investigation. The company has also agreed to reimburse its thirty-two representatives registered in Connecticut the $42,000 in penalties they had been assessed. American Express explained the reimbursement to its agents in a letter which outlined the reasons for the reimbursement of the penalties that were assessed against them.
"I believe this order will send a strong message that pressuring your local stockbroker into making decisions contrary to a client's financial needs and objectives will not be tolerated," Commissioner Burke stated. "Stockbrokers should never be put into a situation where corporate policy puts them at odds with what's in the best interest of their clients."
Link to Consent Order