The self-regulatory agency for securities dealers fined AmSouth Bancorporation $150,000 Friday and censured the Alabama bank holding company for misleading customers about the risks involved in buying mutual funds.
The action by the National Association of Securities Dealers follows NASD investigations in Florida and other states.
In making the settlement, AmSouth denied wrongdoing. "We did consent to the actions, but it was without admitting any wrongdoing whatsoever," said AmSouth spokesman Jim Underwood. "The issues brought up by the NASD no longer exist."
The NASD had been investigating AmSouth, which has its Florida headquarters in Tampa, for several years.
In April, a suit filed in an Alabama state court said the bank tricked customers into cashing in insured instruments like certificates of deposit and buying uninsured ones like shares in mutual funds. AmSouth has denied the contentions.
Separately in April, AmSouth's former compliance officer, Krikor Naccachian, filed a formal complaint against the company, in which he said the company intentionally misled customers and broke securities laws in Florida and elsewhere. He is in arbitration with AmSouth over his complaint.
"I think this vindicates (Naccachian) and it's certainly an indication of a good thing to have the NASD working on these problems," said Jonathan Alpert, the Tampa attorney who represents Naccachian.
In levying the fine, NASD officials said many sales violations occurred because of an inadequate supervisory system at the bank holding company's AmSouth Investment Services Inc. subsidiary.
"Broker/dealer firms must be especially vigilant and ensure that customers who purchase mutual funds on the premises of banks understand the risks and rewards of those investments," said NASD regulatory chief Mary Schapiro.
AmSouth consented to NASD findings that it improperly paid bank employees to generate brokerage business.
The NASD said AmSouth has agreed to a compliance audit of internal policies and procedures by an independent party.
The bank also will develop a revised supervision and compliance manual, which will include an organizational structure and indicate areas of supervisory responsibility. The new manual will be subject to review by the independent party.
The firm, which has 65 brokers at its branches in Florida, Alabama, Tennessee and Georgia, also failed to document its review of some mutual funds, maintain new account documents for certain customers, or keep adequate books and records about fund sales, the NASD said.
Like AmSouth, many banks have taken heat in recent years for not always disclosing the risks involved in buying investments as they push into the mutual funds business. Alpert has gained national attention for filing suits against banking giants NationsBank and First Union Corp. on behalf of clients in the Tampa Bay area.
AmSouth stock closed Friday at $36.25, unchanged.
_ Information from Bloomberg Business News was used in this report.