The
Financial Industry Regulatory Authority Inc. flagged another broker-dealer for not giving clients discounts when they bought mutual fund A shares, this time reaching a settlement with Lincoln Investment Planning in which the firm paid $1.37 million to clients whom it overcharged between January 2011 and this June.
Lincoln, which currently has more than 1,500 registered reps, for the last 7½ years "disadvantaged certain retirement plan and charitable organization customers who were eligible to purchase class A shares in certain mutual funds without a front-end sales charge,"
according to the order. "Those eligible customers were instead sold class A shares with a front-end sales charge or class B or C shares with back-end sales charges and higher ongoing fees and expenses."
Over the period in question, Lincoln Investment Planning did not have a supervisory system and procedures designed to ensure that eligible clients who bought mutual funds got the benefit of sales charge waivers, according to the order.
"We self-reported this to Finra and had no client complaints," said Edward Forst, CEO of Lincoln Investment Planning. "Because of the way we handled the matter, we had no fine from Finra."
Securities regulators recently have been focused consistently on whether broker-dealers and registered investment advisers give the proper discounts to clients who buy mutual fund A shares.
In February, the Securities and Exchange Commission launched an initiative to waive fines against investment advisers who come forward and admit that they had been putting clients into high-fee mutual fund classes and agree to reimburse those clients.
And in December, Finra noted in its summary of 2017 exam findings its concern about brokers recommending high-fee share classes without determining whether they're suitable for their clients.
Finra also censured Lincoln Investment Planning over the matter. The firm accepted the settlement without admitting or denying Finra's findings.
Finra noted in its order that in resolving the issue, it recognized Lincoln Investment Planning's "extraordinary cooperation," including initiating the investigation into the client discounts and providing restitution to clients over a 7½-year period.
