SEC Charges Nationwide With Pricing Violations
May 18, 2015 by Press Release
“For more than a 15-year period, Nationwide intentionally delayed the delivery of untracked mail containing orders from customers and processed them at the next day’s prices in violation of the law,” said Sharon B. Binger, Director of the SEC’s Philadelphia Regional Office.
The SEC’s order finds that Nationwide instructed the post office to divide mail directed to the P.O. Box for its variable contract business from mail directed to P.O. boxes for other lines of business and maintain it in separate areas of the post office loading dock. Nationwide typically hired a private courier to collect and deliver the mail from the loading dock to its offices. Nationwide arranged for its courier to travel to the post office at 3 a.m., 5 a.m., and 7 a.m. each business day to retrieve mail for the other lines of business, but specifically instructed the courier not to retrieve variable contract mail at these times. Nationwide instead instructed the courier to deliver variable contract mail no earlier than 4:01 p.m. in order to deem it received when it arrived “in the building.” If the courier arrived in Nationwide’s parking lot before 4 p.m., the instructions were to wait until 4:01 p.m. to enter the building. Therefore, some couriers intentionally delayed their arrival time at Nationwide by stopping to purchase meals or fuel. By contrast, priority mail related to the variable contract business was promptly retrieved by the courier and processed by Nationwide before 4 p.m. for pricing at the current day’s price.
The SEC’s order further finds that Nationwide employees complained to post office staff when portions of the variable contract mail were inadvertently mixed together with the other mail and therefore delivered to Nationwide’s offices before 4 p.m. After one such incident, Nationwide requested a meeting with the post office and stressed that it needed “late delivery” of variable contract mail “due to regulations that require Nationwide to process any mail received by 4 p.m. the same day.”
Nationwide consented to the entry of the SEC’s order finding that the firm willfully violated Rule 22c-1 under the Investment Company Act of 1940. Nationwide neither admits nor denies the findings, and must cease and desist from committing future violations of the rule and pay the $8 million penalty.
The SEC’s investigation was conducted by Lisa M. Candera and supervised by Brendan P. McGlynn with assistance from examination staff in the Philadelphia Regional Office. The SEC appreciates the assistance of the U.S. Postal Inspection Service.