U.S. securities regulators have ordered a Newark, N.J.-based brokerage firm to pay more than US$10 million in restitution for improper handling of mutual fund orders.
The Financial Industry Regulatory Authority (FINRA) last week ordered Pruco Securities, LLC to pay more than US$10.7 million in restitution, plus interest, to customers who placed mutual fund orders by fax or mail between late 2003 and June 2011 and received an inferior price for their shares. It also fined Pruco US$550,000 for its pricing errors and for failing to have an adequate supervisory system and written procedures in this area.
FINRA says that one of Pruco’s retail brokerage business units didn’t comply with rules requiring it to price orders on the day it’s received prior to 4:00 p.m. Instead, it says the unit priced more than 850,000 paper orders, on average, one or two days after it received them, in the mistaken belief that they could use “best efforts’ (up to two business days) to process paper orders.
Pruco neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. The regulator also notes that in determining the sanctions, FINRA took into consideration that the firm self-reported the pricing issue, undertook an internal review, implemented changes to its policies and procedures, and commenced restitution to the affected customers.
It says that approximately 37,000 accounts for 34,000 customers will receive more than US$10.7 million in restitution, plus interest. The firm is in the process of calculating restitution for up to 3,240 additional customers who will receive restitution upon the completion of its review, it notes.