(May 18) – “NASD Regulation Inc. reached a settlement under which Kemper Distributors Inc. was censured and fined $100,000 for running mutual-fund advertisements found to be “inaccurate” and for violating other NASD advertising-related rules,” writes Sam Favate in today’s Wall Street Journal.

“The action is the latest in a series of regulatory crackdowns on inadequate or misleading disclosures by asset-management firms.

“NASD Regulation, the regulatory arm of the National Association of Securities Dealers in Washington, said Kemper published eight ads between April and September 1997. The ads, which ran in publications including The Wall Street Journal, contained inaccurate graphs relating to the performance of Kemper-Dremen High Return Equity Fund. The graphs showed the performance of a hypothetical $10,000 investment in the fund and didn’t accurately portray increases and decreases in the value of the investment, the NASD said.

“Despite being cautioned by the NASD not to use ads with these types of errors, the firm continued to run problematic ads, the NASD said. Another ad violated the rules because it didn’t depict the risks of fluctuating prices in investing.

“The sales unit of Scudder Kemper Investments didn’t admit or deny the NASD’s findings. Scudder Kemper is part of Zurich Financial Services Group. In a prepared statement, Kemper Distributors said the settlement relates to ‘inadvertent production errors’ in two print advertising campaigns. Kemper Distributors called them ‘unintentional technical violations’ and noted that they took place before the December 1997 merger that formed Scudder Kemper Investments.

”We have worked closely with the NASDR to resolve this matter,’ the company said, adding that ‘new policies and procedure’ are in place to prevent recurrences. In settling, Kemper Distributors agreed to prefile any advertisements that use graphs and charts for six months.

“Last week, Dreyfus Corp. agreed to pay nearly $3 million to resolve charges by the Securities and Exchange Commission and the New York state attorney general that the firm made inadequate or false disclosures in 1996 about its then-hot Dreyfus Aggressive Growth Fund. The Dreyfus case clearly indicated the SEC’s intention to press fund companies to include cautionary language about their portfolios’ risks and operating strategies.