MSI Financial Services, Inc., a brokerage firm headquartered in Springfield, Massachusetts, has been censured by Financial Industry Regulatory Authority (FINRA) by consenting to findings that excessive fees were charged by the firm within customers’ accounts regarding mutual fund transactions, and that the firm did not appropriately supervise operations to protect customers from being overcharged. Letter of Acceptance, Waiver and Consent, No. 2016052332801 (May. 12, 2017).
According to the AWC, from July 1, 2009, to March 27, 2017, MSI Financial Services did not provide waivers of sales charges for class A share purchases effected within investment accounts of the firm’s charitable organization and retirement plan customers. The AWC stated that upfront charges had been incurred by customers in connection with buying the class A shares; however, these customers met eligibility criteria for their charges to be waived. In addition to the class A share purchases, customers reportedly bought other share classes containing back-end charges and additional fees.
Evidently, MSI Financial Services, from 2009 to 2017, failed to create a supervisory process to make sure sales charges for mutual fund transactions were waived when applicable. The AWC indicated that financial advisors were tasked by the firm to handle waiver determinations, yet they were not apprised and trained concerning waiver applicability. Apparently, the firm did not implement a process to detect when prospectuses identified waivers or when waivers had not been applied. Further, the AWC reported that over four thousand accounts contained transactions where customers did not receive the sales charge waivers despite the customers having been eligible. The AWC revealed that customers overpaid $1,900,000.00. Consequently, FINRA found that the firm’s conduct was violative of FINRA Rules 2010, 3110, and NASD Conduct Rule 3010.
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