Fifteen Firms to Pay Over $21.5 Million in Penalties to Settle SEC and 
NASD Breakpoints Charges -- Affected Mutual Fund Customers to Receive Refunds

    WASHINGTON, Feb. 12 /PRNewswire/ -- The Securities and Exchange Commission
(SEC) and NASD today announced enforcement and disciplinary actions against a
total of 15 firms for failure to deliver mutual fund breakpoint discounts
during 2001 and 2002.  Breakpoint discounts are volume discounts applicable to
front-end sales charges on Class A mutual fund shares (front-end loads).  SEC
and NASD each brought cases against a group of 7 firms, and NASD separately
brought actions against the other 8 firms.  The 15 firms have agreed to
compensate customers for the overcharges, pay fines in an amount equal to
their projected overcharges that total over $21.5 million, and undertake other
corrective measures.
    The SEC and NASD had previously determined that many investors were not
receiving correct breakpoint discounts on their mutual fund purchases.  (See
Joint SEC/NASD/NYSE Report of Examinations of Broker-Dealers Regarding
Discounts on Front-End Sales Charges on Mutual Funds, link below).  NASD
directed securities firms to conduct an assessment of their mutual fund
transactions, using a statistically significant sample of the 2001 and 2002
transactions.  The assessments showed that most firms did not uniformly
deliver appropriate breakpoint discounts to customers (eligible transactions
were certain automated purchases of Class A shares).  Overall, discounts were
not delivered in about one of five eligible transactions.  The average amount
of overcharge per transaction was $243, ranging up to $10,000.  Based on the
self-assessment, NASD estimated that at least $86 million was owed to
investors for 2001 and 2002 alone.  NASD directed all firms to provide refunds
to customers who were overcharged, directed 446 firms to notify customers that
they may be due refunds and directed 174 firms to conduct a complete review of
individual transactions for possible missed opportunities.  The firms named in
today's enforcement actions fell into two categories: those with higher than
average failure rates and high dollar amounts of total overcharges; and those
whose failure rates were significantly higher than average.
    To resolve these actions, each of the 15 firms agreed to review all front-
end load mutual fund trades in excess of $2,500 conducted between January 1,
2001 and November 3, 2003; to provide written notification of the firm's
problem delivering breakpoint discounts to each customer who purchased front-
end load mutual funds from January 1, 1999 through November 3, 2003, and
advise these customers that they may be entitled to a refund; to provide
refunds where appropriate; and to pay a fine equal to the amount of the firm's
projected overcharges.
    The names of the firms charged, fines to be paid (equal to projected
overcharges to customers), and projected rates of missed breakpoints, are as
follows:

    Firms settling with the SEC and NASD in separate actions:

     Wachovia Securities, LLC                     $4,844,465          28.77%
     UBS Financial Services Inc.                  $4,621,768          30.03%
     American Express Financial Advisors Inc.     $3,706,693          29.70%
     Raymond James Financial Services, Inc.       $2,595,129          31.78%
     Legg Mason Wood Walker, Inc.                 $2,315,467          34.61%
     Linsco/Private Ledger Corp.                  $2,232,805          35.64%
     H.D. Vest Investment Securities, Inc.        $  725,216          33.39%

    Firms settling with NASD only:

     Bear, Stearns & Co. Inc.                     $  280,469          52.00%
     Lehman Brothers Inc.                         $  123,882          59.96%
     Cresap, Inc.                                 $   99,458          88.48%
     SWS Financial Services                       $   66,468          89.69%
     Kirkpatrick, Pettis, Smith, Polian Inc.      $   39,935          53.56%
     Southwest Securities, Inc.                   $   36,971          89.02%
     David Lerner Associates, Inc.                $   32,711          64.88%
     Brecek & Young Advisors, Inc.                $   31,224          53.74%

    The SEC orders find that the firms, by failing to disclose to certain
customers that they were not receiving the benefit of applicable breakpoint
discounts, violated Section 17(a)(2) of the Securities Act of 1933.  The NASD
made findings that the firms violated NASD's just and equitable principles of
trade rule by failing to give customers the benefit of applicable breakpoint
discounts and by failing to disclose to those customers that they were not
receiving the benefit of applicable discounts.  In addition, the Commission
charged six of the seven firms (all but Raymond James Financial Services) with
failing to disclose on customer confirmations the remuneration the firms
received in connection with the front-end loads, in violation of Rule 10b-10
under the Securities Exchange Act of 1934.  H.D. Vest also resolved charges by
the Commission related to unsuitable sales of Class B mutual fund shares, as
described in more detail below.   The fine imposed on Cresap, Inc. was reduced
to $50,000 based on the firm's demonstrated financial condition.
    Stephen M. Cutler, Director of the Commission's Division of Enforcement,
remarked: "These Commission actions target seven firms whose breakpoint
overcharges totaled $21 million over a two-year period.  But our actions and
the NASD's are a message to every broker-dealer: you must exercise due care to
provide appropriate breakpoint discounts to mutual fund investors, or
enforcement action will be taken against you, and substantial penalties will
be imposed."
    "Securities firms must deliver on promises made to customers; breakpoints
are no exception.  We estimate that for 2001 and 2002 alone, $86 million is
owed to investors from the failure to award breakpoint discounts,
demonstrating just how critical it is that firms identify, remediate and take
steps to prevent problems in this critical segment of the markets," said Mary
Schapiro, NASD Vice Chairman and President of Regulatory Policy and Oversight.
"The fines and other remedial measures make clear that these types of
failures, whatever the cause, will not be tolerated, and that the interests of
customers are paramount."
    As described in the NASD and Commission settlements, when an investor buys
mutual fund shares with a front-end load, the sales charge, or load, portion
of the offering price is not invested in the fund, but instead is paid to the
fund's principal underwriter or distributor.  When the purchase is made
through a broker-dealer, the fund's principal underwriter or distributor pays
a part of the front-end load amount to the broker-dealer that sold the fund
shares to the investor.  Mutual funds that sell shares charging front-end
loads usually offer discounts at certain pre-determined levels of investment,
which are called breakpoints.  Front-end loads and breakpoints can vary among
funds within a fund complex or across fund complexes.  For example, a mutual
fund might charge an investor 5.75 percent of the sales price for purchases of
less than $50,000, but reduce the sales charge to 4.75 percent for investments
between $50,000 and $99,999.  An investor can usually procure discounts on
sales charges at investment levels of $50,000, $100,000, $250,000, and
$500,000.  At the $1 million investment level, generally there is no sales
charge.  Investors may aggregate purchases in one or more accounts to reach a
breakpoint threshold.
    The NASD and Commission orders further state that broker-dealers that sell
mutual fund shares to retail customers must disclose applicable breakpoint
discount information to their customers and must have procedures reasonably
designed to ascertain information necessary to determine the availability and
appropriate level of breakpoints.  A failure to do so can result not only in
the customer being deprived of a benefit to which he or she is entitled, but
also in the broker-dealer and registered representative receiving increased
commissions at the customer's expense.
    In addition to finding breakpoint violations, the Commission's settled
order against H.D. Vest Investment Securities, Inc. finds that the firm, in
recommending that certain customers purchase large amounts ($100,000 or
greater) of Class B mutual fund shares, failed to adequately disclose that an
equivalent investment in Class A shares could yield a higher return as a
result of applicable breakpoint discounts and reduced ongoing expenses.  Among
other things, the order directs Vest to pay a $691,812 fine based on its
excess Class B share commissions, and to offer the affected customers the
opportunity to convert their Class B shares to A shares.  Further, Vest agreed
to retain an independent consultant to conduct a review of, and make
recommendations regarding, the firm's Class B share policies and procedures.
    The original examination findings underlying these breakpoints actions
were outlined in the Joint SEC/NASD/NYSE Report of Examinations of Broker-
Dealers Regarding Discounts on Front-End Sales Charges on Mutual Funds
(available at: http://www.nasdr.com/pdf-text/bp_joint_exam.pdf and at
http://www.sec.gov/news/studies/breakpointrep.htm).  Earlier this year, NASD
led an industry task force that explored and recommended ways that the mutual
fund and broker-dealer industries could prevent breakpoint problems and errors
in sales load calculations in the future. The Task Force issued a report that
recommends a number of operational enhancements, disclosure requirements and
regulatory changes, which is available at:
http://www.nasdr.com/breakpoints_report.asp. Industry working groups are in
the process of implementing the Task Force's recommendations.
    Investors can learn more about breakpoints by going to
http://www.sec.gov/answers/breakpt.htm and
http://www.nasd.com/Investor/alerts/alert_breakpoint_refund.htm.
    Investors can access mutual fund expense calculators at
http://www.sec.gov/investor/tools/mfcc/mfcc-int.htm and
http://www.nasd.com/Investor/Tools/Calculators/FundCalc/expense_analyzers.asp.
    The SEC's Administrative Orders are posted on the Commission's website,
http://www.sec.gov.
    The NASD's settlement documents are posted at
http://www.nasdr.com/breakpoints.asp.