Voya Financial Advisors Inc. a securities broker dealer headquartered in Des Moines Iowa has been censured by Financial Industry Regulatory Authority (FINRA) based upon findings that (1) the firm overcharged customers on their purchases of mutual funds by failing to apply sales charge discounts and (2) the firm neglected to supervise its mutual fund sales to ensure that customers were not overpaying on their mutual fund investments. Letter of Acceptance Waiver and Consent No. 2016050231901 (Apr. 23, 2019).
According to the AWC, customers of the firm were able to purchase various mutual funds shares including Class A, Class B, Class C, and Class R shares. These share classes were different in structure, and contained different sales charges and fees, although they represented interests in the same securities portfolio. Apparently, customers were required to pay more up from when purchasing Class A shares, and most of those up front charges went to the firm through a concession.
Alternatively, customers paid less initially if purchasing Class B and C shares because of there not being an upfront sales charges; however, there were higher service and distribution fees. Class R shares did not carry an upfront sales charge but were higher in overall fees than Class A shares. The AWC stated that given these differences in the structures, charges and fees, investors’ returns on the interests in the same portfolio differed.
Investors were reportedly able to receive waivers of sales charges on mutual fund purchases so long as the customers were charitable organizations or retirement plans. Evidently, with the waivers, there was no reason to choose any share class but the Class A shares. Voya Financial Services offered funds which carried these waivers; however, the firm did not properly apply them, causing customers to incur excess costs on their investments. The AWC revealed that the firm actually overcharged customers by more than $100,000.00.
Specifically, the firm neglected to adequately supervise its application of the waivers for customers that were eligible for them on their mutual fund purchases. The AWC stated that financial advisors were tasked with identifying if the sales charge waivers applied; however, those advisors were not reasonably educated on making determinations. Additionally, the firm failed to implement procedures or policies meant to help advisors determine if the sales charge waivers should have been applied. FINRA found the firm’s supervisory failures in this regard to be violative of FINRA Rules 2010, 3110 as well as National Association of Securities Dealers (NASD) Conduct Rule 3010.
