8-KRegulation FD

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Jul 13, 2005)

Filed July 13, 2005For Securities:AXP

Summary

This 8-K filing from American Express Company (AXP) on July 13, 2005, primarily discloses a settlement agreement between its American Express Financial Advisors (AEFA) operating segment and the New Hampshire Bureau of Securities Regulation (NHBSR). The NHBSR had alleged violations related to undisclosed revenue sharing and directed brokerage payments from non-proprietary mutual funds, as well as incentives for advisors to sell proprietary products and other conflicts of interest. The settlement involves AEFA agreeing to pay a $5 million fine to the NHBSR, up to $2 million in restitution to New Hampshire clients, and $375,000 for investigation costs. While these amounts represent a financial outlay, the company notes that reserves have already been established in prior quarters to cover this matter. As part of the agreement, AEFA will also engage a consultant to review its practices in New Hampshire to determine the final restitution amount.

Key Highlights

  • 1American Express Financial Advisors (AEFA) has reached a settlement with the New Hampshire Bureau of Securities Regulation (NHBSR).
  • 2The settlement resolves allegations of securities law violations, including failure to disclose revenue sharing and directed brokerage payments.
  • 3AEFA will pay a $5 million fine to the NHBSR.
  • 4Restitution of up to $2 million will be made to New Hampshire clients.
  • 5AEFA will also cover $375,000 in investigation costs.
  • 6The company had previously established reserves to cover these potential costs.
  • 7A consultant will be retained to review AEFA's practices in New Hampshire.

Frequently Asked Questions

The NHBSR alleged that AEFA failed to disclose revenue sharing and directed brokerage payments received from non-proprietary mutual funds. Additionally, the allegations included failure to disclose incentives for advisors to sell proprietary products and other potential conflicts of interest.

AEFA has agreed to pay a $5 million fine, up to $2 million in restitution to New Hampshire clients, and $375,000 for investigation costs, totaling a potential maximum of $7.375 million. However, the company has indicated that reserves for this matter were already established in prior quarters, suggesting the impact on current earnings may be mitigated.

Yes, as part of the settlement, AEFA has agreed to retain a consultant to review its practices and procedures across all its New Hampshire offices. This review aims to ensure compliance and determine the final restitution amount for clients.

The restitution amount is 'up to $2 million'. The final amount will be determined after a consultant reviews AEFA's practices and procedures in New Hampshire, implying that the actual payout could be less than the maximum specified.