MML Investor Services, LLC, a broker-dealer headquartered in Springfield, Massachusetts, was censured by Financial Industry Regulatory Authority (FINRA) after consenting to findings that the firm excessively charged customers concerning mutual funds transactions, and failed to have adequate supervisory procedures and protocols designed to make sure that eligible customers received waivers of sales charges. Letter of Acceptance, Waiver and Consent, No. 2016049185701(Nov. 15, 2016).
According to the AWC, from July 1, 2009 to September 20, 2016, charitable organization and retirement plan customers were overcharged by the firm based upon the firm not applying waivers of sales charges when class A shares were purchased. Rather, the AWC stated that the firm sold customers other share classes, such as class B or class C shares, which contained higher expenses and back end sales charges, or class A shares which contained an upfront sales charge.
FINRA stated that customers who had qualified for the waivers of sales charges pertaining to class A shares were not supposed to pay the upfront load associated with such purchases. Additionally, the AWC reported that customers who qualified for class A sales charge waivers had no legitimate basis to make purchases of other share classes, given that other share classes contained higher expenses and sales loads.
The AWC stated that MML Investor Services did not properly supervise sales charge waiver applicability. Particularly, financial advisors had been solely relied upon by the firm to detect when waivers applied, but the firm did not effectuate policies designed to assist financial advisors make determinations on waivers. Moreover, the firm reportedly failed to effectuate written procedures for detecting applicability of sales charge waivers for customers based on the prospectuses of mutual funds.
According to the AWC, approximately seven hundred and ninety-two customers made mutual funds purchases through MML Investor Services in which sales charge waivers failed to be properly applied by the firm. As a result, $1,577,112.12 in excess charges were paid by customers to the firm. Ultimately, FINRA found that the firm’s conduct was violative of FINRA Rule 2010, 3110 and NASD Conduct Rule 3010. As such, MML Investor Services was censured, and consented to providing $1,864,167.77 in restitution to affected customers.
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