American Express Co.'s financial advisory unit has sued the state of New Hampshire, claiming that federal law pre-empts state regulators' authority to pursue fraud charges against Amex brokers.
In February, the New Hampshire Bureau of Securities Regulation accused American Express Financial Advisors of defrauding customers by giving its brokers and advisers secret incentives to sell its weak-performing, in-house mutual funds. The state said this violated state and federal securities laws that require advisers to act in their clients' best interests and to disclose conflicts that could affect their recommendations.
The state's complaint said that American Express gave local executives bonuses tied to sales of its proprietary mutual funds and ran contests that gave top sellers a year's lease on a Mercedes-Benz.
The American Express lawsuit, filed Friday in U.S. District Court in Concord, N.H., seeks an injunction to bar New Hampshire from pursuing the case.
David Kanihan, a spokesman for the Amex financial advisory business, said, "The issues raised in this matter are covered by federal securities laws, and therefore we believe that a federal court is the appropriate jurisdiction" for the issue.
The state's administrative complaint, which asks a state hearing officer to impose $17.5 million of fines, would be heard by a state regulator.
