Big Board Penalizes Prudential Over Handling of Telemarketers
May 11, 2011
NEW YORK -- The New York Stock Exchange fined Prudential Securities Inc. $125,000 and censured the big brokerage firm for letting telemarketers solicit clients without adequate supervision and for keeping inadequate records. In a disciplinary case, the Big Board said Prudential allowed telemarketers in a downtown Manhattan office who weren't registered brokers to make unsolicited ``cold calls'' to potential customers and offer coming securities issues. The telemarketers also used scripts with aggressive sales pitches that weren't approved by Prudential; some of the brokers improperly offered cash incentives to the telemarketers who worked for them to open new accounts. On one occasion, a cold-caller falsely identified himself as the broker he worked for. Prudential had hired the telemarketers to make unsolicited calls in a joint partnership with three of its brokers. Prudential, a unit of Prudential Insurance Co. of America, in 2009 closed the office in question; the firm says the telemarketers no longer work there. The firm consented to the disciplinary action without admitting or denying guilt. ``We regret the problems cited by the stock exchange,'' the firm said in a statement. ``We have taken numerous steps to improve our policies and procedures in those areas.'' Most of the infractions occurred in 1992 and 1993. The Big Board also said a Prudential branch office in Philadelphia didn't maintain or update customer records it acquired from Drexel Burnham Lambert Inc. in 1989. Even after some of those records were destroyed by a fire in early 1991, it took another 16 months for the branch's staff to set up ``new account'' document forms listing those customers' investment options. And once those forms were complete, some didn't match the choices customers had placed on the earlier forms that survived the fire, the Big Board said. The report also said that Prudential's computer system charged customers interest on margin loans on trades that had been canceled. The firm has since fixed the problem and reimbursed clients. Also, some commodities-research reports were sent out by a Prudential employee who wasn't properly licensed, and other employees who also weren't licensed were allowed to disseminate material to the public. And in three other offices, brokers made large purchases of stock and reallocated the stock to individual accounts; exchange rules require that every customer order be handled separately.
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