The National Association of Securities Dealers announced that a brokerage firm has been sanctioned for overcharging clients who transferred their accounts to another dealer.

The regulator said that McLaughlin, Piven and Vogel Securities Inc. of New York has agreed to pay restitution to customers who were charged excessive and unreasonable fees in connection with the transfer of their brokerage accounts to other broker-dealers through the Automated Customer Account Transfer System. The NASD has identified more than 1,500 customers who were overcharged.

The NASD also fined MPV US$50,000 and ordered the firm to retain an independent consultant to determine the amount of restitution due customers and to review and make recommendations concerning the adequacy of the firm’s current policies, systems, procedures and training concerning compliance with NASD’s rules relating to charges for services performed.

In settling with NASD, MPV neither admitted nor denied the allegations, but consented to the entry of NASD’s findings.

ACATS is administered by the National Securities Clearing Corporation. It was designed to expedite the transfer of customer accounts between participants in a registered clearing agency, to alleviate the demands of manual processing of account transfers on firms and to reduce costs.

“Fees and charges assessed by firms must be reasonable and, in the case of account transfers, bear a relationship to the actual cost of the services provided,” said James Shorris, NASD executive vice president and head of enforcement. “In this case, the firm attributed a portion of the ACATS fees it charged – as much as US$295 – to its costs of investigating brokers whose customers had left the firm. This was an utterly improper assessment of an ACATS fee and was excessive, given that MPV was charged as little as US$35 by its clearing firm to process these account transfers.”

The NASD said that MPV charged the high transfer fees, in part, to offset the firm’s costs of investigating departing brokers, to determine whether they had made false statements to persuade customers to transfer their accounts in violation of the departing brokers’ employment agreements. NASD found that the respective US$295 and US$195 transfer fees were excessive, unreasonable and largely unrelated to MPV’s actual costs of processing account transfers through ACATS. Any costs associated with investigating possible impropriety by departing brokers were unrelated to MPV’s actual costs of effecting account transfers and may not be shifted to the customers.

Last month, an NASD task force issued recommendations for expediting and streamlining transfers of customer accounts from one brokerage firm to another through ACATS. The recommendations include a number of operational enhancements and regulatory measures.