American Express to Pay Fines

American Express Co. agreed Tuesday to pay $7.4 million to end a New Hampshire regulator’s investigation into whether the firm’s financial advisory unit improperly steered clients to the company’s own mutual funds.

In the settlement with the New Hampshire Bureau of Securities Regulation, New York-based American Express will pay the state $5.4 million in fines, penalties and expenses and as much as $2 million in restitution to investors, the regulator said.

The state accused American Express Financial Advisors of pressuring its brokers to sell its own mutual funds to clients, even in instances where they were underperforming investments.

In one sales contest, the firm offered brokers who sold the most shares in company funds a free one-year lease on a Mercedes-Benz, the state said.

“What we found was a pervasive effort ... to sell cookie-cutter plans heavily laden with American Express mutual funds, without disclosing to clients how this behavior financially benefited the company and its agents,” said Jeff Spill, the bureau’s deputy director of enforcement.

Federal and state regulators in recent years have been cracking down on brokerages for alleged conflicts of interest in their investment pitches. Brokerage Morgan Stanley in 2003 paid $2 million to settle allegations that it used forbidden incentives to encourage the sale of its own mutual funds over others. That case was brought by NASD, formerly the National Assn. of Securities Dealers, the brokerage industry’s self-regulatory group.

American Express, which is in the process of spinning off its advisory unit, was “pleased to resolve this matter,” a spokesman said.