gift may not be the ticket

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    Gift may not be the ticket
    Nov 25
    Wall St Journal

    Regulators are investigating whether brokerage firms gave "excessive" gifts, such as Super Bowl tickets and cases of wine, to mutual fund advisers in an attempt to influence decision-making about where to steer fund trades.

    Officials at the Securities and Exchange Commission and the National Association of Securities Dealers say they have found instances of brokers giving gifts to fund advisers and have launched an inquiry to determine whether the practice is widespread.

    The regulators are examining whether mutual-fund advisers directed equity trades - and the lucrative commissions they produce - to brokerage firms that lavished them with gifts. Such a move could be a violation of an adviser's duty to make decisions with the interests of investors in mind.

    "Our concern is whether the self-interest of gift recipients may have trumped the best interests of investors," said Lori Richards, director of the SEC's office of compliance inspections and examinations.

    It is the latest inquiry into potential conflicts of interest between mutual fund and brokerage firms. Regulators are already investigating the indirect payments fund companies make to brokerage firms in exchange for being included in a line-up of available funds.

    The SEC has banned the long held practice of fund management companies directing trades and commissions to brokerage firms as compensation for selling and prominently placing their shares.

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