Summit Brokerage Services, Girard Securities, Inc., First Allied Securities, Inc., and Cetera Financial Specialists, were censured by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that the firms deprived their respective customers with discounts on mutual funds transactions and failed to supervise procedures to ensure that waivers of sales charges were applied for customers that were eligible for them.
According to the AWCs, from January 1, 2009, to July 1, 2017, the firms sold their charitable organization or retirement plan customers Class A shares containing upfront sales charges, as well as Class B shares and Class C shares that contained high fees or back-end sales loads. Critically, these customers were reportedly eligible for waivers on their purchases of mutual funds but did not receive them.
The AWC revealed that the firms’ application of the waivers of sales charges had not been adequately supervised. Evidently, the firms’ financial advisors were expected to uncover when waivers applied but were not provided any assistance by the firms for how to determine that customers were eligible. Apparently, the firms failed to create and implement procedures for purposes of reviewing prospectuses to identify whether a waiver of the sales charge was applicable. Additionally, there were no controls that the firms utilized to determine if a waiver had not been applied. Consequently, FINRA found that the firms violated FINRA Rules 2010 and 3110, as well as NASD Conduct Rule 3010.
Evidently, Cetera Financial Specialists determined that by not applying sales charges waivers since July 1, 2009, it overcharged ninety-nine customers an estimated $501,922.00, and consented to paying restitution of $572,260.00. Letter of Acceptance, Waiver and Consent, No. 2016050259101 (Aug. 21, 2017). First Allied Securities, Inc. consented to findings that since July 1, 2009, it overcharged three-hundred and eighty customers an estimated $769,054.00 regarding customers’ mutual fund purchases, and agreed to pay $876,915.00 in restitution. Letter of Acceptance, Waiver and Consent, No. 2016050259301 (Aug. 21, 2017).
Girard Securities, Inc. concluded that since July 1, 2009, it overcharged sixty-eight customers by an estimated $90,125.00, and consented to paying $102,775.00 in restitution. Letter of Acceptance, Waiver and Consent, No. 2016050259401 (Aug. 21, 2017). Finally, Summit Brokerage Services, Inc. estimated that since July 1, 2009, it overcharged no less than two-hundred and eighty-five customers an estimated $313,014.00, agreeing to pay $356,915.00 to customers.
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