Five broker-dealers were ordered to reimburse clients a total of $18.4 million for charging them improper fees for mutual funds, Finra announced Tuesday.
Edward Jones was ordered to pay $13.5 million,
Stifel Nicolaus & Co., $2.9 million, Janney Montgomery Scott, $1.2 million, Axa Advisors, $600,000 and Stephens Inc., $150,000. The firms neither admitted nor denied the allegations as part of the settlement with the Financial Industry Regulatory Authority Inc.
The regulator found that going back as early as July 2009, the mutual funds these firms made available through their retail platforms failed to offer these investors — charity and retirement accounts — waivers that they were due for some upfront sales charges on Class A shares. In other instances, the investors were put into the wrong share classes, which subjected them to charges they should not have been assessed.
Three months ago
Finra ordered Wells Fargo Advisors, Raymond James and LPL Financial to pay a combined $30 million for the same type of violations. Wells Fargo later expanded its remediation plan to pay $7 million more to additional accounts, so in all, the eight firms will pay about $55 million to about 75,000 retirement accounts and charities, Finra said.
“These actions are further evidence of our commitment to pursue substantial restitution for adversely affected mutual fund investors who were not afforded the full benefit of available sales charge waivers,” said Brad Bennett, Finra's executive vice president and enforcement chief, in a statement.
The five firms that are part of Tuesday's announcement also “unreasonably relied on financial advisers to waive charges” for these accounts without training them or providing them with the correct information on how to do so, the industry group said.
Last year,
Finra fined Merrill Lynch $8 million in addition to ordering restitution for similar overcharges on mutual fund sales.
The eight firms mentioned in this article agreed to pay back clients proactively, and therefore avoided fines.
Edward Jones, which will pay $13.5 million in restitution, said it has made changes to correct the problem and noted its cooperation in the matter.
“Edward Jones is simplifying the mutual funds offerings for some firm-held retirement accounts to help ensure this problem doesn’t occur in the future,” said spokesman John Boul in a statement.
Stifel Nicolaus will pay $2.9 million in restitution. It did not have an immediate comment available.
Janney Montgomery Scott, which will pay $1.2 million, said in a statement it was recognized by Finra for its “cooperation to identify the issue proactively” and modify its internal procedures.
Axa Advisors, which will pay $600,000 in restitution, said it strives to meet the industry’s best practices and regulatory requirements.
“We have fully cooperated with the Finra investigation into this industry-wide issue and are pleased to have reached a resolution with Finra,” a statement from AXA said.
Stephens, which will pay $150,000, did not have an immediate comment.
