The National Association of Securities Dealers has sanctioned three brokerage firms for permitting improper mutual fund market timing by their clients.

The regulator announced today that it has ordered ING Funds Distributor (IFD) to pay a fine of US$1.5 million for permitting improper market timing in ING funds and related violations – the largest fine NASD has imposed in a market timing case. NASD also ordered IFD to pay more than US$1.4 million in restitution to the affected mutual funds, and imposed a US$25,000 fine and 30-day supervisory suspension on an IFD supervisor. In settling with NASD, IFD and the supervisor neither admitted nor denied the allegations, but consented to the entry of NASD’s findings.

In a separate notice, the NASD reports that it has fined Janney Montgomery Scott LLC, of Philadelphia US$1.2 million for permitting improper market timing and related violations. In addition, NASD ordered the Philadelphia-based firm to pay nearly US$1 million in restitution to the affected mutual funds. It also neither admitted nor denied the allegations, but consented to the entry of NASD findings.

Finally, the NASD fined First Allied Securities Inc. of San Diego US$408,000 for facilitating the deceptive efforts of three hedge fund customers to engage in improper market timing transactions. NASD also ordered First Allied to pay approximately US$326,500 to reimburse the affected funds. It neither admitted nor denied the allegations, but consented to the entry of NASD’s findings.

The NASD said the Janney and First Allied cases both involved trading by hedge funds. In the ING case, the trading involved two registered reps and one independent investment advisor.