8-KOther Events

AMERICAN EXPRESS CO 8-K Report (May 19, 2004)

Filed May 19, 2004For Securities:AXP

Summary

This 8-K filing from American Express Company (AXP) reports that its broker-dealer subsidiary within the American Express Financial Advisors (AEFA) operating segment has received a notification from NASD, Inc. (NASD). The NASD staff has made a preliminary determination to recommend bringing an action against AEFA concerning alleged violations of federal securities laws and NASD rules. These allegations stem from an industry-wide review of mutual fund and brokerage practices and specifically relate to AEFA's revenue sharing arrangements with certain non-proprietary mutual funds.

Key Highlights

  • 1AEFA received a notification from NASD regarding potential violations of securities laws and regulations.
  • 2The allegations are part of a broader industry-wide review of mutual fund and brokerage practices.
  • 3Specific allegations include AEFA's failure to properly disclose revenue sharing arrangements from January 2001 to May 2003.
  • 4AEFA is also accused of failing to disclose these arrangements on brokerage confirmations.
  • 5The NASD alleges AEFA received directed brokerage from January 2001 to December 2003.
  • 6AEFA intends to discuss these issues with the NASD staff.
  • 7AEFA is cooperating fully with the NASD inquiry and other regulatory inquiries.

Frequently Asked Questions

American Express is reporting that its broker-dealer subsidiary, AEFA, has been notified by NASD that NASD staff preliminarily intends to recommend bringing an action against AEFA for alleged violations related to revenue sharing arrangements and directed brokerage practices.

The NASD is questioning AEFA's practices regarding revenue sharing arrangements with non-proprietary mutual funds, specifically alleging failure to properly disclose these arrangements from January 2001 to May 2003 and on brokerage confirmations. Additionally, AEFA is accused of receiving directed brokerage from January 2001 to December 2003.

AEFA intends to take the opportunity to discuss the issues raised by the NASD staff and is cooperating fully with the NASD's inquiry as well as other regulatory inquiries.

The NASD's allegations against AEFA are occurring within the context of a broader industry-wide review of mutual fund and brokerage industries being conducted by various regulators, suggesting it is part of a larger trend affecting the sector.