By: Jason Robinson, 2015 Student Intern
On October 27, 2015, the Financial Industry Regulatory Authority (FINRA) announced that it had ordered five firms to pay restitution payments totaling $18 million. The sanctioned firms and their respective fines were: Edward D. Jones & Co., L.P. – $13.5 million; Stifel Nicolaus & Company, Inc. – $2.9 million; Janney Montgomery Scott, LLC – $1.2 million; AXA Advisors, LLC – $600,000; and Stephens Inc. – $150,000. The fines stem from the firms’ failure to waive mutual fund sales charges for eligible charitable organizations and retirement accounts. To read FINRA’s news release about these sanctions click here.
Mutual funds come in either Class A, B or C shares. Class A shares typically have lower fees than the other two options, but they charge customers an upfront sales charge. When FINRA investigated the abovementioned firms, they found that the firms’ retail platforms offered waivers for charitable organizations and retirement plan accounts. Although these waivers were offered, since July 2009 the firms in question failed to waive sales charges for covered customers in a number of instances. FINRA’s investigation also revealed that some of these firms failed to adequately supervise the sales of mutual funds that offered sales charge waivers.
Brad Bennett, FINRA’s Executive Vice President and Chief of Enforcement, said, “These actions are further evidence of our commitment to pursue substantial restitution for adversely affected mutual fund investors who were not afforded the full benefit of available sales charge waivers.
Cooperation credit was granted to those firms that were proactive in identifying and remediating instances where their customers did not receive applicable discounts.”
Investors can research the disciplinary records of their broker or brokerage-firm by using FINRA’s BrokerCheck which is available at www.finra.org/brokercheck. Throughout 2014, the public conducted 18.9 million reviews of brokers and firms.