Robert W. Baird & Co. Inc. and the Financial Industry Regulatory Authority Inc. said Monday that they had reached a settlement in which Baird pays clients close to $520,000 in restitution for the firm's failure over a six-year period to give clients certain sales charge waivers and fee rebates offered by mutual fund companies.
Milwaukee, Wisconsin-based Baird has more than 3,500 financial advisors and registered reps in 380 branch offices.
According to Finra, mutual fund issuers generally offer various privileges to their shareholders, and these may include a so-called "right of reinstatement." This allows investors to purchase shares of a fund after previously selling shares of that fund or another fund in the same fund family, without incurring a front-end sales charge — typically, but not always, involving Class A shares — or to recoup all or part of a contingent deferred sales charge.
The settlement with Baird stemmed from Finra's 2020 targeted examination regarding rights of reinstatement, according to the self-regulator.
From January 2015 to March 2021, "Baird's supervisory system did not provide certain customers with mutual fund sales charge waivers and fee rebates to which they were entitled through rights of reinstatement offered by mutual fund companies," according to the Finra settlement.
More than 2,300 customer accounts were affected, and Baird was in violation of industry rules, according to Finra.
A spokesperson for Baird didn't return a phone call Monday afternoon to comment. According to the settlement, Baird accepted Finra's finding in the matter without admitting or denying Finra's findings. Finra said it "credited" the firm for its "extraordinary cooperation" in this matter, according to the settlement. Finra censured the firm over the matter.
Last December, Finra penalized Morgan Stanley $802,000 for failing to catch excess sales charges and fees from mutual fund transactions between 2015 to 2021.
Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.
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