D.A. Davidson is latest broker-dealer snagged for overly expensive fund shares

Firm will repay $447,000 to clients it overcharged for more than seven years

Nov 1, 2018 @ 1:58 pm

By Bruce Kelly

D.A. Davidson & Co. is the latest in a long line of brokerage firms to be flagged by the Financial Industry Regulatory Authority Inc. for not giving certain clients discounts when they bought mutual fund A shares. On Tuesday, Finra said it had reached a settlement with D.A. Davidson in which the firm will repay $447,000 to clients it overcharged between January 2011 and April 2018.

D.A. Davidson, which currently has 1,033 registered reps and advisers, over that period "disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase class A shares in certain mutual funds without a front-end sales charge," according to the Finra settlement. The eligible customers instead were sold Class A shares with a front-end commission or Class B or C shares with back-end charges and higher ongoing fees and expenses.

Over this time, the firm failed to put in place and maintain supervisory systems and procedures designed to ensure that eligible clients received the benefit of the appropriate discounts, according to Finra.

D.A. Davidson agreed to the settlement without admitting to or denying Finra's findings. The firm was censured by Finra but not fined.

A spokesman for the firm, Ulric Kelly, did not comment.

Securities regulators recently have been focusing on whether broker-dealers and registered investment advisers give the proper discounts to clients who buy mutual fund A shares. Most recently, in September, Finra said Lincoln Investment Planning would pay $1.37 million to clients whom it overcharged from January 2011 to this June.

In February, the Securities and Exchange Commission launched an initiative to waive fines if investment advisers come forward and admit that they put clients into high-fee mutual fund classes and agree to reimburse those clients.

And in December, in Finra's summary of 2017 exam findings, the regulator noted its concern about brokers recommending high-fee share classes without determining whether they're suitable for their clients.


What do you think?

View comments

Recommended for you

Featured video


How InvestmentNews picks its Women to Watch winners

The process is laborious and exacting, but well worth it. The end result each year is an impressive group of women in the advice industry from whom others can draw inspiration.

Latest news & opinion

10 ETFs that are up more than 35% this year

Amid the stock market carnage, there are still some funds posting big gains.

10 biggest HSA providers rated

Morningstar rated the largest plan providers as investment and spending vehicles.

Morningstar: DOL fiduciary rule reduces inflows to mutual funds with high loads

With the measure's demise, will the SEC's advice reform sustain the momentum?

6 tax strategies for year-end planning

How to help clients maximize their wealth using specific tax strategies before the end of the year.

Ohio National offers buyouts, ends commission trails amid jumbled regulatory oversight of VAs

Jurisdiction is shared between the SEC, Finra and state insurance commissioners. Will any of them step in?


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print