Broker-Dealer Fined for Mutual Fund Overcharges

A broker-dealer settled FINRA charges for failing to identify potential sales charge discounts on customers’ mutual fund transactions.

In a Letter of Acceptance, Waiver and Consent, FINRA found the broker-dealer’s supervisory procedures failed to assess the suitability of mutual funds transactions in multiple different mutual fund families, which resulted in missed sales charge discounts. FINRA stated that had the mutual funds been purchased within one mutual fund family, the customers’ sales charges would have been reduced.

FINRA concluded that the broker-dealer violated FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade") for failing to implement supervisory procedures reasonably designed to confirm the suitability of mutual fund transactions submitted through the broker-dealer’s electronic order entry system.

To settle the charges, the broker-dealer agreed to (i) a censure, (ii) pay a $50,000 fine and (iii) pay restitution in the amount of $63,296, plus interest to affected customers. FINRA said that the firm has since revised its supervisory procedures.