In its year-end review, the National Association of Securities Dealers said that it filed 1,360 enforcement actions, barred or suspended 830 individuals from the securities industry and collected more than US$102 million in disciplinary fines in 2004.

NASD enforcement continued its focus on mutual fund sales and trading issues bringing more than 120 disciplinary actions in this area against securities firms in 2004. Violations in these cases concerned market timing and late trading as well as mutual fund sales and compensation practices.

Following NASD’s initiative in 2003 in which the private sector regulator directed firms to make refunds to customers who were entitled to a breakpoint discount that they did not receive in connection with a mutual fund purchase, NASD and the SEC settled charges against 15 firms with the most substantial breakpoint failures. Those firms were ordered to pay over US$21.5 million in penalties.

NASD settled excessive mark-up charges with Goldman Sachs, Deutsche Bank, Citibank and Miller Tabak, for US$5 million each. The four firms each agreed to sanctions of US$2 million for excessive markups, US$1.5 million for deficient books and records and US$1.5 million for inadequate supervision. They also agreed to pay restitution from the US$2 million allocated for the excessive markups.

One of NASD’s major trading cases in 2004 was the joint settlement between Knight Securities, LP, the SEC and NASD. NASD determined that Knight’s former lead institutional sales trader had the firm acquire a stock position after receiving an institutional customer’s order, and then waited until the price of the stock moved before executing trades to fill the customer’s order, creating greater profits for Knight at the expense of his customer. Knight paid a US$12.5 million fine to NASD, a US$12.5 million civil penalty to the SEC, and US$54 million in disgorgement and interest to customers.

NASD continued its commitment to investigating abuses relating to the marketing and sale of variable annuities. In 2004, NASD barred and fined individuals and firms in over 65 cases.

Among its other accomplishments, the NASD established the NASD Investor Education Foundation, funded with an initial grant of US$10 million. The Foundation conducted its first round of grant making and will announce the grants early this year.