Five broker-dealers in the Cetera Financial Group network recently agreed to a $3.3 million settlement with the Financial Industry Regulatory Authority (FINRA) over their failure to supervise the application of mutual fund sales charge waivers to eligible clients at charitable organizations and in retirement plans.
The settlements cover the amount the broker-dealers overcharged their clients, plus interest. According to FINRA, the broker-dealers overcharged their clients between July of 2009 and July of 2017. Each broker neither admitted nor denied the charges as part of the settlement.
According to FINRA, all five broker-dealers,
“disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase A shares in certain mutual funds without a front-end sales charge… These eligible customers were instead sold class A shares with a front-end sales charge or class B or C shares with back-end sales charges and higher ongoing fees and expenses."
FINRA announced that it was increasing its focus on mutual funds earlier this year when they requested information and documents from broker-dealers related to reimbursements or waivers for mutual fund sales charges that were available to certain investors.
According to FINRA, the firms these broker-dealers worked for,
"failed to reasonably supervise the application of sales charge waivers to eligible mutual fund sales… The firm relied on its financial advisers to determine the applicability of sale charge waivers, but failed to maintain adequate written policies or procedures to assist financial advisers in making this determination."
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