FINRA Orders Pruco Securities to Pay $10.7 Million in Restitution for Improper Pricing of Mutual Fund Orders; Firm Fined

  FINRA Orders Pruco Securities to Pay $10.7 Million in Restitution for
  Improper Pricing of Mutual Fund Orders; Firm Fined $550,000

Business Wire

WASHINGTON -- December 26, 2012

The Financial Industry Regulatory Authority (FINRA) announced today that it
has ordered Pruco Securities, LLC of Newark, New Jersey, to pay more than
$10.7 million in restitution, plus interest, to customers who placed mutual
fund orders with Pruco via facsimile or mail (paper orders) from late 2003 to
June 2011 and received an inferior price for their shares. FINRA also fined
Pruco $550,000 for its pricing errors and for failing to have an adequate
supervisory system and written procedures in this area.

Brad Bennett, Executive Vice President and Chief of Enforcement, said,
“Pruco’s inadequate supervision and pricing system resulted in thousands of
customers receiving inferior prices for more than seven years. Broker-dealers
must ensure that their systems provide customers with accurate pricing for all
products that the firms offer.”

One of Pruco’s retail brokerage business units, COMMAND, instituted a practice
for handling mutual fund paper orders that was inconsistent with the pricing
requirements of the Investment Company Act of 1940, which requires that mutual
fund orders are priced on the day the order is received prior to 4:00 p.m.
Instead, from late 2003 to June 2011, COMMAND priced more than 850,000 paper
orders, on average, one or two days after it received complete orders prior to
4 p.m. The employees mistakenly believed that they could use “best efforts,”
(i.e. up to two business days) to process mutual fund paper orders and that
paper orders could be priced on the date the order was processed, even if
Pruco received a complete order prior to that date. As a result of these
findings, approximately 37,000 accounts for 34,000 customers will receive more
than $10.7 million in restitution, plus interest. The firm is in the process
of calculating restitution for up to 3,240 additional customers who will
receive restitution upon the firm's completion of its review. The issue was
discovered after an inquiry to COMMAND personnel regarding a fax order
submitted had not been executed until the day after it was received as a
complete order.

FINRA also found that Pruco failed to have an adequate supervisory system to
detect and prevent the mispricing of paper mutual fund orders and to ensure
that customers who submitted paper mutual fund orders received the correct
price. Additionally, Pruco failed to have written procedures for the pricing
of mutual fund orders, and did not provide its employees with any training or
training materials regarding paper mutual fund pricing requirements.

When determining the sanctions imposed in this matter, FINRA took into
consideration that the firm self-reported the pricing issue, undertook an
internal review, implemented changes to its policies and procedures and
commenced restitution to the affected customers.

In concluding the settlement, Pruco, neither admitted nor denied the charges,
but consented to the entry of FINRA's findings.

FINRA's investigation was conducted by Gino Ercolino and Jennifer Mennella,
under the supervision of Myles Orosco and Richard Best.

Investors can obtain more information about, and the disciplinary record of,
any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck.
FINRA makes BrokerCheck available at no charge. In 2011, members of the public
used this service to conduct 14.2 million reviews of broker or firm records.
Investors can access BrokerCheck at or by calling
(800) 289-9999. Investors may find copies of this disciplinary action as well
as other disciplinary documents in FINRA's Disciplinary Actions Online

FINRA, the Financial Industry Regulatory Authority, is the largest independent
regulator for all securities firms doing business in the United States. FINRA
is dedicated to investor protection and market integrity through effective and
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Financial Industry Regulatory Authority (FINRA)
Michelle Ong (202) 728-8464
Nancy Condon (202) 728-8379
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