Cetera Advisor Networks LLC, a brokerage firm headquartered in El Segundo, California, has been censured by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that the firm charged customers with excessive fees in reference to mutual fund transactions, and inadequately supervised its business operations to make sure customers were not overcharged. Letter of Acceptance, Waiver and Consent, No. 2016050258801 (May. 3, 2017).
According to the AWC, from July 1, 2009, and January 1, 2017, the firm did not apply waivers of sales charges for the firm’s charitable organization and some retirement plan customers when transactions of class A shares were effected in their accounts. Apparently, a front-end charge was assessed when customers purchased class A shares even though they met the eligibility requirements for the charge to be waived. The AWC stated that customers were also sold other share classes via the firm which exposed them to more fees and sales charges on the back-end. The AWC further stated that the firm took advantage of customers based upon the additional fees customers incurred.
The AWC also revealed that Cetera Advisor Networks, from 2009 to 2017, failed to adequately monitor sales charge waiver applicability for mutual fund transactions; the firm depended on financial advisors to determine when to apply waivers instead. However, the firm’s advisors were not given proper training in this regard; they were not informed about when waivers of sales charges were available. The firm reportedly had no processes for detecting when prospectuses referenced sales charge waivers for customers, or when waivers were not applied. According to the AWC, seven-hundred and twenty-two customers were eligible for waivers but had not received them, causing customers to overpay $1,666,404.00. FINRA found that the firm’s conduct was violative of FINRA Rules, 2010, 3110, and NASD Conduct Rule 3010.
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