Park Avenue Securities LLC a securities broker dealer headquartered in New York New York has been censured by Financial Industry Regulatory Authority (FINRA) supported by findings that (1) customers were excessively charged by the firm on mutual fund transactions and (2) the firm failed to adequately supervise its sales charges waivers to ensure that they were applied for eligible customers. Letter of Acceptance Waiver and Consent No. 2016049977201 (July 16, 2019).
According to the AWC, from January 1, 2011 to August 31, 2018, customers were assessed front-end sales charges or had been assessed higher expenses and fees than they should have paid because of the firm’s failure to apply sales charge waivers for those customers. Evidently, sales charges waivers had been offered through the mutual funds offered by Park Avenue Securities LLC during this period, and these waivers were referenced within the prospectuses.
Apparently, the application of the sales charge waivers failed to be adequately supervised by Park Avenue Securities. Particularly, the firm delegated its responsibility to financial advisors who were not familiar with how to make the determinations. Additionally, there was a lack of information in the firm’s written supervisory procedures concerning the sales charge waivers.
Moreover, FINRA noted that the advisers were neither trained about the sales charge waivers nor made aware from Park Avenue Securities that the sales charge waivers were made available to customers. Also, the firm reportedly neglected to use any controls which could identify if the sales charge waivers were not applied.
FINRA concluded that the firm’s supervisory failures caused two hundred sixty-four customers to pay $560,170.00 in extra fees or front-end loads. Therefore, FINRA found the firm’s supervisory failures violative of FINRA Rules 2010 and 3110 as well as National Association of Securities Dealers (NASD) Rule 3110.
This is not the first time that Park Avenue Securities has been censured by FINRA for misconduct. Particularly, Park Avenue Securities was fined $300,000.00 and censured by FINRA based upon findings that the firm overcharged investors on unit investment trust transactions placed in customers’ accounts. Letter of Acceptance Waiver and Consent No. 2014041679201 (Oct. 19, 2015).
According to the AWC, Park Avenue Securities neglected to identify and properly apply unit investment trust sales charge discounts. Evidently, two thousand seven hundred fifteen purchases of unit investment trusts had been eligible for discounts. However, for transactions involving exchanges and rollovers, those discounts had not been applied. FINRA stated that approximately $443,255.07 in excess charges had been paid by customers. FINRA found the firm’s conduct violative of FINRA Rule 2010.
Moreover, FINRA stated that Park Avenue Securities did not create and implement an adequate supervision system or written supervisory procedures for purposes of confirming that customers were provided those discounts. Instead, the firm tasked its stockbrokers with ensuring the discounts were applied even though the firm never trained stockbrokers on how to identify or apply them. FINRA found the firm’s conduct violative of FINRA Rule 2010 and NASD Conduct Rule 3010.
