This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Waddell & Reed Settles NASD Charge

Waddell & Reed (WDR) will pay $18 million in fines and restitution to settle allegations the investment firm employed "aggressive" tactics associated with the sale of variable annuities.

Securities regulators contend the Kansas-based investment firm engaged in a national sales campaign to persuade customers to switch variable annuity contracts issued by one life insurer to those issued by another insurer. The campaign generated extra fees for Waddell & Reed, but led to some 5,000 customers paying unnecessary expenses.

Regulators at the NASD contend Waddell pressured customers to switch annuity contracts "without regard to whether the transactions were in the customer's best interests."

The brokerage launched the campaign in 2001 after it failed to secure a satisfactory fee-sharing deal with United Investors Life Insurance, which had sold variable annuities to Waddell customers. The brokerage negotiated a more favorable revenue deal with a rival insurer, Nationwide Insurance, and began urging customers to switch policies.

A variable annuity is a mutual fund-like product packaged in an insurance contract, which offers a tax benefit to the buyer.

The settlement with regulators calls for the brokerage firm to pay a $5 million fine to the NASD and $2 million in fines to several state securities regulators. The brokerage also must provide up to $11 million in restitution to its customers.

In addition, Robert Hechler, the firm's former president, agreed to a six-month suspension from the securities business and to pay a $150,000 fine.

The NASD charges that Hechler "encouraged the sales force to engage aggressively in switching customers," even those some brokers "expressed concern that these switches were not in the best interests of their clients."

As is customary in regulatory settlements, neither Waddell nor Hechler admitted nor denied the allegations raised by regulators.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,880.36 -31.75 -0.19%
S&P 500 1,970.07 +0.12 0.01%
NASDAQ 4,462.9020 +20.2040 0.45%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs