Finra catches Kestra Financial overcharging customers

IBD agrees to repay customers $1.9 million in addition to a $225,000 fine

Feb 14, 2019 @ 11:51 am

By Jeff Benjamin

Kestra Financial has been fined $225,000 and required to pay $1.9 million in restitution for overcharging more than 3,200 mutual fund investors over a nine-year period, Finra announced.

The Financial Industry Regulatory Authority Inc. reached a settlement with the independent broker-dealer for its failure to apply fee waivers on certain mutual funds that were sold to customers between July 1, 2009 and Feb. 22, 2018.

"During the relevant period, Kestra failed to reasonably supervise the application of sales charge waivers and share class determinations for eligible mutual fund sales," according to the Finra agreement.

"The firm relied on its financial advisers to determine the applicability of sales charge waivers, but failed to maintain reasonably designed written policies or procedures to assist financial advisors in making this determination," the agreement continued.

Adam Gana, managing partner at the law firm Gana Weinstein, who was not involved in this case, said firms are often able to get away with overcharging customers because "most investors don't look very closely at the fees and have no idea what they're paying."

"These waived shares have always been a problem area," he added. "The firms know that investors can be oblivious to the fees."

Kestra, which is currently being shopped around by its private-equity parent for a potential sale, did not respond to a request for comment for this story.

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