New Hampshire securities regulators have accused the personal finance advisory unit of American Express Co of defrauding investors by giving incentives to its advisers to push select mutual funds over other funds with better performance. New Hampshire's Securities Bureau filed the complaint on Thursday said it was seeking a fine and restitution of $17.5 million. The regulators accused the company of rewarding its advisors with perks like one year leases on Mercedes Benz automobiles to guide investors to in-house funds, which often did not do as well as other funds.

"The sales force for the New Hampshire branches of the (American Express Financial Advisors unit) were heavily incentivised to sell proprietary and specially selected mutual fund investment products over other products available for sale," the complaint stated.

Regulators said that up until 2002 the unit, known as AEFA, failed to disclose to customers that its financial advisers were paid higher compensation for selling proprietary products versus outside products.

American Express said it has been co-operating with the state of New Hampshire.

Copyright Reuters, 2005