U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission



Washington, D.C., Dec. 1, 2005 - The Securities and Exchange Commission announced settled enforcement proceedings against American Express Financial Advisors Inc., now known as Ameriprise Financial Services, Inc.(AEFA), a registered broker-dealer headquartered in Minneapolis, Minn., related to allegations that AEFA failed to adequately disclose millions of dollars in revenue sharing payments that it received from a select group of mutual fund companies.

As part of its settlement with the Commission, AEFA will pay $30 million in disgorgement and civil penalties, all of which will be placed in a Fair Fund for distribution to certain of AEFA's customers. AEFA also agreed to make certain disclosures to its customers about its revenue sharing program.

The Commission's Order finds that AEFA began receiving substantial revenue sharing payments and directed brokerage commissions from certain mutual fund families for distribution of fund shares starting in 2001. Since that time, affiliates of these mutual fund families have paid AEFA tens of millions of dollars each year in cash and non-cash revenue sharing payments. With one exception, AEFA has offered on its brokerage platform only mutual fund families whose affiliates made revenue sharing payments to AEFA or its own proprietary funds.

At the same time, AEFA failed to disclose to investors that it received tens of millions of dollars each year from these mutual fund families, in addition to commissions and other fees, for selling their mutual funds. AEFA provided these mutual fund families with certain benefits not available to mutual fund families that did not make revenue sharing payments, including, among other things, exclusive shelf space for the sale and marketing of their mutual funds, different levels of access to AEFA's financial advisors depending on how much revenue sharing they paid and reduced or no transaction charges. AEFA also exclusively promoted the 529 college savings plans of mutual fund families from which it received revenue sharing payments.

Linda Chatman Thomsen, Director of the Commission's Division of Enforcement, said, "This settlement reiterates how important it is for financial industry professionals to fully disclose the nature and extent of their conflicts of interest to customers."

Merri Jo Gillette, Regional Director of the Commission's Midwest Regional Office, added, "AEFA's undisclosed receipt of millions of dollars in revenue sharing payments from a select group of mutual fund families created a conflict of interest. When customers purchase mutual funds or interests in 529 plans, they must be told about the full nature and extent of any conflict of interest that may affect the transaction."

In addition to the $30 million payment, AEFA has agreed to be censured and to cease and desist from committing or causing violations of Section 17(a)(2) of the Securities Act of 1933, Section 15B(c)(1) of the Securities Exchange Act of 1934 and Rule 10b-10 promulgated thereunder and Municipal Securities Rulemaking Board Rule G-15. The Commission's Order further requires AEFA to comply with certain undertakings. AEFA has consented to the issuance of the Commission's Order without admitting or denying the findings contained therein.

The Commission's action was filed contemporaneously with related actions by the NASD and the Minnesota Division of Securities.

# # #

For further information contact:

  • Merri Jo Gillette (312) 353-9338
  • Regional Director, Midwest Regional Office
  • Robert J. Burson (312) 353-7428
  • Senior Associate Regional Director, Midwest Regional Office

  Additional materials: Administrative Proceedings 33-8638 and 33-8637



Modified: 12/01/2005