Finra fines AXA $600,000 over misclassified bond funds

Finra fines AXA $600,000 over misclassified bond funds
Funds sold to 401(k) plans as investment grade actually held lots of junk.
MAY 02, 2019

The Financial Industry Regulatory Authority Inc. has fined AXA Advisors $600,000 and ordered the firm to pay approximately $172,000 in restitution for distributing materials that "negligently misrepresentated" five bond funds as investment grade when much of the portfolios consisted of junk bonds. Finra said that AXA will pay the restitution to participants in 401(k) retirement plans that offered the funds. As part of the settlement, Finra also required AXA to send corrective disclosures to all affected plan participants, Finra said in a release. (More:​ Investors flee high-yield bond funds and ETFs) "We remain committed to transparency and accuracy in all communications and we regret this occurred," an AXA spokesman said in an email. "We are pleased to have resolved this matter and are providing remediation to those who may have been adversely impacted." As a result of the misclassifications, AXA distributed thousands of enrollment forms, investment options attachments, and other documents to plan sponsors that were inaccurate and misleading, Finra said. Specifically, AXA distributed approximately 14,500 enrollment forms and 2,500 investment options attachments that misclassified the credit quality of the five bond funds between September 2010 and November 2015. The misrepresentations affected approximately 800 retirement plans and 6,200 plan participants.

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