Brokers cracking down on their own


January 24, 1993|By Knight-Ridder News Service

The National Association of Securities Dealers says it has gotten better at weeding out brokers who bend the rules.

In the past seven years, NASD has seen its fines and disciplinary actions, such as suspensions and lifetime bans, nearly quadruple.

That, however, doesn't mean more violations are occurring, John Pinto, the group's executive vice president, said. NASD simply has gotten better at catching its member brokers who break the rules, he said.

The group, which oversees the over-the-counter market, took disciplinary action against 1,008 of its members last year, down from 1,031 in 1991. It also levied fines totaling $46.7 million, up from $40.2 million the previous year.

Most of the brokers were disciplined for violating sales and trading rules, Mr. Pinto said.

Some of the common violations were misrepresenting investment products, recommending investments not suitable for clients, making unauthorized trades, charging unfair prices and making trades solely to generate commissions.

Many violations are uncovered when NASD makes routine inspections at brokerage firms. Others are reported by disgruntled clients.

A disproportionate number of fines were levied against brokers who sell penny stocks. In most cases, the violations involve brokerage firms that charge too much for the stocks, which are considered risky.


How much do you know about the Social Security system?

Though most workers contribute part of their pay to the federal program, not everyone understands how it works. To help educate workers, the Social Security Administration has a free booklet called "Understanding Social Security." To order a copy, call (800) 772-1213.


Do you contribute to a 401(k) retirement plan? If not, you could falling behind your friends and neighbors in the race to get rich.

During the 1980s, workers who contributed to 401(k) plans saw their net wealth grow "substantially greater" than those who did not, says a report by the National Bureau of Economic Research Inc.

Additionally, the report found that, on average, people who put money into a 401(k) plan saved additional money outside the plan.

A 401(k) allows workers to contribute some of their pretax income to a retirement account. The contributions often are matched, to some extent, by the employer. The tax on both the contributions and the account earnings is deferred until the funds are withdrawn.

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