Financial Industry Regulatory Authority (FINRA) member broker dealers, including Invest Financial Corporation, SII Investments, Investment Centers of America, and National Planning Corporation, have all been censured and fined by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that the firms overcharged charitable organization and retirement account customers in mutual funds transactions, and did not implement adequate supervisory systems and procedures to prevent customers from being overcharged in this regard.
According to the AWCs, the firms provided customers with mutual funds that contained multiple classes of shares, in which the shares differed based on structure, sales charges, and applicable fees. The AWCs revealed that the features of the share classes were detailed in the funds’ prospectuses or statement of additional information, and that the returns investors would expect would be impacted based upon the share class selected. The AWCs stated that sales charge waivers are commonly provided in the purchase of class A shares based upon circumstances which include purchases having been made through charitable organizations and retirement plan customers.
Evidently, the firms failed to provide customers with sales charge waivers when the customers were eligible for them, which caused the customers to pay upfront sales charges pursuant to purchasing class A shares, or back-end sales charges pursuant to class B or class C share purchases. FINRA found that the firm’s failure to provide eligible customers with discounts led the customers to be disadvantaged.
According to the AWCs, firms deficiently supervised the application of sales charge waivers which pertained to certain mutual funds transactions. Evidently, the firms depended on financial advisors to determine the applicability of sales charge waivers. Yet, the firms failed to put into effect appropriate policies designed to provide financial advisors with guidance in making the appropriate determinations.
Additionally, the AWCs stated that the firms failed to create and implement written policies and procedures for purposes of detecting appropriate sales charge waivers to apply for eligible customers based upon the criteria stated in the funds’ prospectuses. Moreover, the AWCs indicated that financial advisors were untrained or did not receive adequate notification from the firm concerning waivers which were available for the customers who were qualified.
Ultimately, the firms failed to set forth reasonable protocols to identify situations where eligible customers were not given waivers. Consequently, FINRA found that the firms’ supervisory failures in this regard had been violative of FINRA Rules 2010 and 3110, as well as NASD Conduct Rule 3010.
Invest Financial Corporation was censured and fined $225,000.00 by FINRA based upon overcharging an estimated 345 customers a total of $442,574.00 between January 1, 2009, and December 31, 2015. Letter of Acceptance, Waiver and Consent, No. 2015046036301 (Feb. 22, 2017).
Investment Centers of America, Inc. was censured and fined $60,000.00 by FINRA based upon overcharging an estimated 162 customers a total of $154,194.00 between January 1, 2011, and December 31, 2015. Letter of Acceptance, Waiver and Consent, No. 2015046688401 (Feb. 22, 2017).
SII Investments, Inc. was censured and fined $75,000.00 by FINRA based upon overcharging an estimated 265 customers a total of $965,720.00 between January 1, 2011, and December 31, 2015. Letter of Acceptance, Waiver and Consent, No. 2015046915601 (Feb. 22, 2017).
National Planning Corporation was censured and fined $60,000.00 based upon overcharging an estimated 381 customers a total of $521,370.00 between January 1, 2011, and December 31, 2015. Letter of Acceptance, Waiver and Consent, No. 2015046915901 (Feb. 22, 2017).
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