SEC Investigates Brokerage Firms' Special Sales Promotions with Mutual Funds

Special sales preference arrangements between mutual funds and brokerage firms are under scrutiny. Although these shelf-space deals have been in place for years, the SEC is considering whether they constitute improper influence upon brokers to push certain funds to customers.

The arrangements involve mutual funds' paying brokerage firms fees for special, or even exclusive, promotion. Neither the special arrangements nor the payments have been disclosed to customers.

The SEC may bring enforcement actions against various firms, including Morgan Stanley Dean Witter, which disclosed the SEC's investigation in one of its public filings.

Source: Wall Street Journal, October 23, 2003