Broker-Dealer Settles FINRA Charges for Supervisory Failures on Higher-Risk Mutual Fund Sales

A broker-dealer settled FINRA charges for failing to enforce suitability related supervisory procedures in connection with the sale of higher-risk mutual funds.

According to FINRA, the broker-dealer did not seek customers' approval before making adjustments to the customers' risk tolerances and investment objectives in order to facilitate sales of higher-risk mutual funds. FINRA stated that customers experienced a net loss of $1.4 million by over-concentrating their higher-risk mutual funds' portfolios as a result of the broker-dealer's "unilateral adjustments."

To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a $250,000 fine, (iii) restitution and rescission to 28 customers and (iv) written certification from a registered principal of the broker-dealer stating that certain supervisory improvements have been implemented.