Regulators Fine Fund Company For Deceptive Advertising
WASHINGTON (AP) _ The chairman and a former officer at the Pilgrim Group of mutual funds were fined and suspended temporarily from the securities industry Monday after regulators found the firm engaged in deceptive advertising.
The punishments by the National Association of Securities Dealers, however, are much less severe than the penalties recommended by a regional panel based in Los Angeles. The NASD is the industry’s largest self-regulatory group and supervises advertising and marketing of mutual funds.
The issue concerned two advertisements that Pilgrim placed in The Wall Street Journal in early 1993 which misrepresented a ranking developed by Lipper Analytical Services, an independent fund rating service.
″The ads in question were, in our view, clearly misleading in their overall effect,″ the NASD said.
The NASD national business conduct committee imposed a $25,000 fine on Palomba Charach Weingarten, chairman and chief executive of Pilgrim. The NASD also suspended her securities industry registration for three months.
Robert Alan Grunburg, Pilgrim’s former compliance officer, was fined $5,000 and suspended from the securities industry for one month.
Earlier, the NASD’s Los Angeles district business conduct committee fined Weingarten $100,000 and ordered a one-year suspension from the industry. In addition, the Los Angeles committee ordered Grunburg to pay a $20,000 fine and serve a one-year suspension.
Richard B. Emerson, a Pilgrim employee, was fined $3,500 in Los Angeles, and didn’t appeal.
Weingarten and Grunburg appealed to the NASD national district business conduct committee, which found the Los Angeles panel’s moves too harsh.
The national committee said the fines and sanctions exceeded NASD guidelines, were too severe given Weingarten’s clean disciplinary record, and should be reduced given the firm’s corrective actions.
Pilgrim said in a statement that it was ″very pleased″ at the reduction, which reflected its ″good faith.″
Pilgrim spokesman Jeffrey S. Lloyd said that during the three months that Weingarten is suspended as a securities industry principal she will run the Pilgrim parent company, The Pilgrim Group, while a separate manager will run Pilgrim Distributors Group, the subsidiary that underwrites mutual funds.