Woodbury Financial Services Inc., a brokerage firm headquartered in Oakdale, Minnesota, has been censured and fined $75,000.00 by Financial Industry Regulatory Authority (FINRA) based upon allegations that the firm failed to appropriately apply sales charge discounts for customers when the customers were eligible to receive them, overcharging them as a result. Letter of Acceptance, Waiver and Consent, No. 2016049976501 (Dec. 20, 2017).
According to the AWC, class A, B, C, and R shares sold by the firm depicted interests in the same investment portfolio but contained differences in sales charge and structure. In certain circumstances, sales charges waivers were applied on class A shares, which impacted customers’ returns. The AWC stated that in circumstances where waivers had been available for those shares, no sales loads on the front-end would be assessed. The AWC stated that if sales charge waivers applied, it would eliminate the rationale for an investor to make class B and C shares.
Multiple funds for charitable organizations and retirement plans reportedly contained sales charge waivers that had been disclosed in the funds’ prospectuses, but those waivers failed to be applied to purchases of mutual funds made by customers when eligible, where those customers had been sold class B and C shares carrying higher expenses and fees or an upfront sales load. FINRA consequently determined that customers were put at a disadvantage by their excessive payments.
The firm’s supervision of sales charge waivers evidently contained inadequacies. Particularly, the AWC indicated that financial advisors had been tasked with making determinations on applicability of waivers, but the firm did not implement reasonable procedures and policies for purposes of aiding advisors to make determinations. The AWC stated that the firm failed to create and implement the requisite procedures to detect circumstances where sales charge waivers were applicable as stated by the funds’ prospectuses.
Financial advisors were reportedly left untrained and without notification about the sales charge waivers for customers that had been eligible. FINRA also noted that the firm failed to perform procedures for identifying when waivers had not been applied. FINRA found that the firm’s supervisory failures were violative of FINRA Rules 2010, 3110 and NASD Conduct Rule 3010.
Evidently, between January 1, 2011 and September 30, 2017, about one-hundred sixty-five customer accounts reflected mutual fund purchases that failed to have sales charged waivers applied. The AWC stated that customers were excessively charged by a total of $114,063.00.
Woodbury Financial Services has also been censured and fined $100,000.00 by FINRA for failing to create and implement a supervision system and written supervisory procedures for purposes of making sure customers purchasing unit investment trust units obtained sales charge discounts when eligible; conduct violative of FINRA Rule 2010 and NASD conduct Rule 3010. Letter of Acceptance, Waiver and Consent, No. 2014041842001 (Nov. 24, 2015).
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
