NASD fined Banc One Securities Corp. $400,000 Wednesday for allowing late trading of its mutual funds.
The fine is the largest ever imposed by any regulator against a company for failing to properly supervise trading practices in its funds. Banc One Securities, whose parent Bank One Corp. was bought by J.P. Morgan Chase & Co. last year, neither admitted nor denied the allegations but consented to the NASD findings.
Late trading is the unlawful practice of allowing investors that place buy or sell orders after the markets have closed to have the trades executed at the net asset value calculated for the trading day just ended. Companies that permit late trades give select customers an information advantage - the ability to trade based on news that breaks after the markets close.
NASD found that the securities unit had allowed late trading from Nov. 1 through 11, 2003. The regulator said Banc One processed about 5,400 mutual fund orders after the market close during that period.
Banc One also violated Securities and Exchange Commission and NASD rules by failing to accurately record the times it received customer orders. This made it impossible for NASD investigators to determine the accuracy of recorded receipt times for thousands of mutual fund orders received by Banc One from May 2, 2003, to Nov. 11 that year.
