Eight leading Wall Street firms have been hit with a total of US$610,000 in fines and restitution payments for not getting clients a fair price on municipal bonds.

The NASD announced today that it has ordered eight firms to pay fines totaling $310,000 and restitution of $300,000 to customers in connection with certain municipal bond trades where customers did not receive a fair price for their bonds.

UBS Financial Services Inc. was hit hardest, with fines of $100,000 and restitution of $100,666 required. The NASD also sanctioned Charles Schwab & Co Inc., Edward Jones, Merrill Lynch, Morgan Stanley DW Inc., Prudential Equity Group LLC Wachovia Securities LLC, and First Trust Portfolios L.P.

The regulator says that it found that customers of these firms received below-market prices when selling their municipal bonds to the firms. This was obvious because the bonds were subsequently resold by other dealers — often in same-day transactions — at markedly higher prices. It says that by relying solely on the prices provided by the broker’s broker to determine the fair market value of the bonds, the customers’ dealer breached their duty to ensure that their customers received a price for their bonds that was reasonably close to fair market value.

“Unlike a traditional mark-up case involving unfair profits to the dealer, these cases involve dealers who failed to take reasonable steps to obtain fair prices for their customers,” said Mary Schapiro, NASD vice chairman and president of regulatory policy and oversight. “Dealers in municipal bonds are obligated to make requisite efforts to ensure that the transaction prices are reasonably related to market value, regardless of the amount of compensation they receive.”

NASD is currently investigating the conduct of the broker’s brokers involved in these transactions. The rules require broker’s brokers to make a reasonable effort to obtain a price for a firm selling its customers’ bonds that is fair and reasonable in relation to prevailing market conditions.

In concluding these settlements, the firms neither admitted nor denied the charges.