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Wachovia Securities

Birmingham, AL: (Jun-21-07) The National Association of Securities Dealers (NASD) filed a lawsuit against Wachovia Securities, alleging that the company failed to adequately supervise its fee-based brokerage business between 2001 and 2004. Wachovia began offering a fee-based brokerage account, called "Pilot Plus," to its customers in 1999. NASD found during 2001 through 2004, Wachovia failed to maintain an adequate supervision system of those accounts. While the firm informed its brokers a Pilot Plus account was not appropriate for customers who made a limited number of trades, buy-and-hold customers and customers with assets below $50,000, Wachovia failed to put in place a system and procedures designed to determine whether Pilot Plus accounts were appropriate for its customers.

NASD's investigation revealed that 594 Wachovia customers, who conducted no trades in their Pilot Plus accounts for at least two consecutive years, paid the firm $1.9 million in fees. Also, 620 Pilot Plus customers held assets of less than $25,000 for at least one full year and paid at least the minimum annual fee of $1,000. This fee represented twice the firm's stated top rate of 2 percent allowed under the Pilot Plus agreement. During the time these customers' eligible assets averaged below $25,000 for at least one full year, they paid a total of about $1 million in Pilot Plus fees.

As part of the settlement reached, Wachovia has agreed to pay the fine of $2 million that has been levied by the NASD. NASD also ordered Wachovia to pay restitution to 1,300 customers who were inappropriately allowed to continue maintaining fee-based accounts or who were inappropriately charged account fees on class-A mutual fund share holdings. [CHARLOTTE BUSINESS JOURNAL: FEE FINE]

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Published on Jun-28-07


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