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.
