Prudential Will Stop Favoring Sale of In-House Products : Insurance: The firm says it is ending the higher broker payments to avoid the appearance of bias.

NEW YORK — Prudential Securities Inc. will stop paying its brokers more to sell in-house products than other companies’ offerings, which make less money for Prudential.

The unit of Prudential Insurance Co. of America, in a bid to avoid potential conflicts of interest, will pay the same commissions to its brokers whether they sell the firm’s products--mutual funds, annuities, unit trusts or underwritten stocks and bonds--or a competitor’s, spokesman Charles Perkins said. The new policy takes effect April 1.

Prudential traditionally paid its 5,700 brokers 5% more for selling the firm’s services than for those marketed by other investment banks or independent mutual fund companies. The firm’s 60 mutual funds have total assets of $46 billion.

The practice is common on Wall Street, where capturing client assets can be key to steady profits. But it is coming under increasing scrutiny from regulators and some brokerage executives because it can lead to the perception that brokers are putting themselves and their employers ahead of their customers.

“I strongly believe that the public’s view of our industry is inextricably linked to our compensation practices,” Securities and Exchange Commission Chairman Arthur Levitt Jr. said in a speech last year. “There’s just no way to shed the appearance of a conflict of interest” in such pay schemes, he said.

Prudential, the nation’s fifth-largest securities firm, is changing its pay practices because “we want to remove any perception, correctly or incorrectly, that there was any bias and to ensure a level playing field,” Perkins said.

In the past two years, the firm learned a painful lesson about conflicts. It paid more than $1.8 billion in penalties and settlements and admitted to criminal wrongdoing in a limited-partnership scandal.

Prudential sold about $8 billion of limited partnerships in the 1980s and early 1990s. Investors lost more than $1 billion as the assets owned by the partnerships declined in value. Many sued the firm, alleging that Prudential misrepresented the risks, rewards and liquidity of the partnerships.