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Three brokerage firms have agreed to pay a total of $5.8 million to resolve regulators’ allegations that they allowed improper trading in mutual funds by favored clients to the detriment of long-term shareholders. The National Association of Securities Dealers, the brokerage industry’s self-policing organization, on Monday announced the separate settlements over allegations of so-called “market-timing” abuses by First Allied Securities Inc., ING Fund Distributors and Janney Montgomery Scott LLC. The firms neither admitted nor denied wrongdoing under the agreements. The NASD said the $1.5 million civil fine to be paid by New York-based ING Fund Distributors, a unit of Dutch financial-services company ING Groep NV, is the largest the organization has levied in a market-timing case. The company also agreed to pay $1.4 million in restitution. The NASD also sanctioned individuals at each of the firms. The regulators’ moves were the latest enforcement actions stemming from a 2-year-old industrywide crackdown on alleged abuses in the trading and marketing of mutual funds. First Allied, based in San Diego, agreed to pay a $400,000 civil fine and to repay the affected mutual funds some $325,000. Philadelphia-based Janney Montgomery Scott LLC is paying a $1.2 million fine and returning $1 million. Market timing, which involves rapid purchases and sales of fund shares in order to benefit from short-term market fluctuations, is not illegal but is prohibited by many mutual funds because it can disadvantage ordinary shareholders. Market-timing abuses in the $8 trillion fund industry cost fund investors an estimated $5 billion a year before the crackdown by industry, federal and state regulators. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

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