American Funds Distributors Inc. was charged Wednesday with violating an NASD rule by directing about $100 million of brokerage commissions during three years to 50 brokerage firms that were the top sellers of its mutual funds.
The payments rewarded firms for past sales and encouraged further ones, according to NASD, the securities industry's self-regulatory body.
The complaint alleged that American Funds Distributors calculated "target commissions" from 2001 through 2003 that it intended to direct to each of the top-selling retailers of its 29 funds.
American Funds told its parent company, Capital Research and Management Co., which firms it had these arrangements with, according to the complaint, and the amounts targeted for each firm.
Mary L. Schapiro, the vice chairman of NASD, said in a statement that the complaint shows that it is "just as impermissible to offer and make such payments as it is to receive them."
Chuck Freadhoff, a spokesman for American Funds, did not return phone calls seeking comment.
American Funds has more than $550 billion of assets under management and has been the fastest-growing of the big fund companies in recent years as it flew below the radar while some competitors were named in the mutual fund trading investigations. Financial Research Corp. has reported that American Funds had $89.8 billion of inflows last year after getting $65.6 billion in 2003.
The Los Angeles company is being examined by California Attorney General Bill Lockyer as part of a probe of mutual fund sales practices. He is investigating whether fund companies defrauded California investors by failing to disclose deals in which broker-dealers got paid to recommend particular funds.
