FINRA Orders Pruco Securities to Pay $10.7 Million in Restitution for Improper Pricing of Mutual Fund Orders; Firm Fined $550,000

Wed Dec 26, 2012 10:23am EST

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WASHINGTON--(Business Wire)--
The Financial Industry Regulatory Authority (FINRA) announced today that it has
ordered Pruco Securities, LLC of Newark, New Jersey, to pay more than $10.7
million in restitution, plus interest, to customers who placed mutual fund
orders with Pruco via facsimile or mail (paper orders) from late 2003 to June
2011 and received an inferior price for their shares. FINRA also fined Pruco
$550,000 for its pricing errors and for failing to have an adequate supervisory
system and written procedures in this area. 

Brad Bennett, Executive Vice President and Chief of Enforcement, said, "Pruco`s
inadequate supervision and pricing system resulted in thousands of customers
receiving inferior prices for more than seven years. Broker-dealers must ensure
that their systems provide customers with accurate pricing for all products that
the firms offer." 

One of Pruco`s retail brokerage business units, COMMAND, instituted a practice
for handling mutual fund paper orders that was inconsistent with the pricing
requirements of the Investment Company Act of 1940, which requires that mutual
fund orders are priced on the day the order is received prior to 4:00 p.m.
Instead, from late 2003 to June 2011, COMMAND priced more than 850,000 paper
orders, on average, one or two days after it received complete orders prior to 4
p.m. The employees mistakenly believed that they could use "best efforts," (i.e.
up to two business days) to process mutual fund paper orders and that paper
orders could be priced on the date the order was processed, even if Pruco
received a complete order prior to that date. As a result of these findings,
approximately 37,000 accounts for 34,000 customers will receive more than $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 firm's completion of its review. The issue was discovered after an
inquiry to COMMAND personnel regarding a fax order submitted had not been
executed until the day after it was received as a complete order. 

FINRA also found that Pruco failed to have an adequate supervisory system to
detect and prevent the mispricing of paper mutual fund orders and to ensure that
customers who submitted paper mutual fund orders received the correct price.
Additionally, Pruco failed to have written procedures for the pricing of mutual
fund orders, and did not provide its employees with any training or training
materials regarding paper mutual fund pricing requirements. 

When determining the sanctions imposed in this matter, 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. 

In concluding the settlement, Pruco, neither admitted nor denied the charges,
but consented to the entry of FINRA's findings. 

FINRA's investigation was conducted by Gino Ercolino and Jennifer Mennella,
under the supervision of Myles Orosco and Richard Best. 

Investors can obtain more information about, and the disciplinary record of, any
FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA
makes BrokerCheck available at no charge. In 2011, members of the public used
this service to conduct 14.2 million reviews of broker or firm records.
Investors can access BrokerCheck at or by calling
(800) 289-9999. Investors may find copies of this disciplinary action as well as
other disciplinary documents in FINRA's Disciplinary Actions Online database. 

FINRA, the Financial Industry Regulatory Authority, is the largest independent
regulator for all securities firms doing business in the United States. FINRA is
dedicated to investor protection and market integrity through effective and
efficient regulation and complementary compliance and technology-based services.
FINRA touches virtually every aspect of the securities business - from
registering and educating all industry participants to examining securities
firms, writing rules, enforcing those rules and the federal securities laws,
informing and educating the investing public, providing trade reporting and
other industry utilities, and administering the largest dispute resolution forum
for investors and firms. For more information, please visit

Financial Industry Regulatory Authority (FINRA)
Michelle Ong (202) 728-8464
Nancy Condon (202) 728-8379 

Copyright Business Wire 2012
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