FSC Securities Corporation, a brokerage firm headquartered in Atlanta, Georgia, has been censured and fined $100,000.00 by Financial Industry Regulatory Authority (FINRA) by consenting to findings that it failed to apply mutual fund sales charge waivers for its customers that were eligible to receive them. Letter of Acceptance, Waiver and Consent, No. 2017054137901 (Dec. 20, 2017).
According to the AWC, the firm sold mutual funds containing different share classes in the same securities portfolio, where each share class contained differences as to the amount and structure of sales charges as well as the ongoing asset-based fees. The AWC stated that investors’ returns in the same mutual fund differed because of the difference in fees, charges, breakpoints, and waivers pertaining to each share class.
FINRA stated that investors who qualified for class A share class waivers would have no purpose to invest in other share classes, and charitable organizations and retirement plans often received waivers on the front-end sales charges on class A shares. The firm reportedly failed to apply those waivers even though they were available to customers. Instead, the firm evidently sold the class A shares with a front-end sales charge, or sold class B or C shares containing either back-end charges or additional expenses and fees.
The AWC revealed that the firm did not adequately supervise sales charge waiver applicability, depending instead on its financial advisors to make determinations as to applicability. The AWC stated that the firm failed to set forth reasonable procedures and policies to guide the advisors in making waiver determinations, and failed to create and implement procedures to uncover available waivers listed in the funds’ prospectuses.
Moreover, the firm failed to provide advisors with notification and training concerning waivers of mutual fund sales charges, and did not undertake measures to identify when waivers were not applied. FINRA concluded that the firm’s supervisory failures were violative FINRA Rules 2010 and 3110, as well as NASD Conduct Rule 3010.
The AWC revealed that from January 1, 2011 to September 30, 2017, two-hundred and twenty-one accounts contained mutual fund share purchases where waivers had not been processed for customers when the customers were eligible. Consequently, customers reportedly overpaid by $380,520.00.
The information contained herein has been obtained from reliable sources however may not be accurate and is not guaranteed by us. Readers are encouraged to undertake their own independent investigation and evaluation of the relevant facts. All claims and allegations are subject to adjudication, decisions may be subject to appeal, and no inference is intended, nor should any inference be made from any information contained herein from any source.
This posting and the information on our website is for general information purposes only. This content should be not considered legal advice, and any responses, comments, e-mails, other communications do not form any attorney client relationship. Attorney Advertisement. See Important Disclaimer
Guiliano Law Group
Our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
For more information concerning common claims against stockbrokers and investment professionals, please visit us at securitiesarbitrations.com
To learn more about FINRA Securities Arbitration, and the legal process, please visit us at securitiesarbitrations.com
REQUEST A FREE CONSULTATION
Fill out the form below to recieve a free and confidential intial consultation.
