Firm Settles Charges for Excess Mutual Fund Sales Charges

A broker-dealer settled FINRA charges for failing to reasonably supervise the "application of rights of reinstatement [benefits]" for eligible mutual fund customers. 

According to the AWC, the firm's supervisory system did not provide customers with mutual fund sales charges and fee rebates that they were entitled to "through rights of reinstatement offered by mutual fund companies." FINRA said that the firm relied on an automated alert system which was "set to identify transactions in which a customer liquidates a position in a fund family and then purchases back into the same family at a later date." FINRA found that the automated alert failed to capture all eligible reinstatement privileges. Further, FINRA found that the firm failed to reasonably review triggered alerts to ensure that eligible customers received eligible reinstatement privileges. As a result, the affected customers "across more than 1,450 accounts paid approximately $265,000 in excess sales charges and fees during that period."

FINRA found that the firm violated FINRA Rule 3110 ("Supervision") and Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the firm agreed to (i) censure; (ii) pay a $75,000 fine; and (iii) remediate the issues identified in the AWC by implementing a supervisory system.