Dec 26 Pruco Securities LLC has been ordered to pay more than $10.7 million to customers who were hurt by the New Jersey-based broker-dealer's alleged mispricing of mutual fund orders.
Wall Street's industry funded-watchdog, the Financial Industry Regulatory Authority, said on Wednesday that one of Pruco's retail brokerage business units mishandled more than 850,000 paper orders from late 2003 to June 2011, resulting in "inferior" pricing for customers. FINRA also fined Pruco $550,000 for its pricing errors and an inadequate supervisory system.
FINRA found that the company did not adequately train its employees to properly handle mutual fund pricing for paper orders - those received by fax or mail.
The Investment Company Act of 1940 requires that mutual fund orders be priced before 4 p.m. on the day the order is received. Pruco's brokerage unit, COMMAND, allegedly priced the paper orders, on average, one or two days late.
Approximately 34,000 customers will receive compensation for the roughly 37,000 accounts impacted. The firm is in the process of calculating restitution for up to 3,240 additional customers who will receive compensation upon the firm's completion of its review, FINRA said.
Pruco Securities, based in Newark, is a subsidiary of Prudential Financial Inc. A company spokesman was not immediately available for a comment.