FINRA Fines Five Firms for Failure to Waive Mutual Fund Charges

Fines PaidFive Broker-Dealers Ordered to Pay $18 Million in Restitution for Failing to Wave Class A Mutual Fund Share Charges

The Financial Industry Regulatory Authority (“FINRA”) has sanctioned Edward D. Jones & Co., L.P.; Stifel Nicolaus & Company, Inc.; Janney Montgomery Scott; LLC, AXA Advisors, LLC; and Stephens Inc. for failing to waive mutual fund sales charges for eligible charitable organizations and retirement accounts. According to the FINRA news release, the failure has resulted in the firms having to pay restitution, including interest, to customers. The firms were not required to pay a fine in addition to the restitution because the firms self-reported the issue to FINRA.

Unlike Class B and C mutual fund shares, Class A mutual fund shares typically waive initial sales charges for charities and retirement accounts. In this case, FINRA learned that since 2009, 25,000 eligible accounts were charged the sales fee. Furthermore, the five (5) broker-dealers failed to adequately supervise the sales of the mutual funds that offered sales charge waivers. The firms neither admitted nor denied the findings.

According to Brad Bennett, FINRA’s Executive Vice President and Chief of Enforcement “These actions are further evidence of our commitment to pursue substantial restitution for adversely affected mutual fund investors who were not afforded the full benefit of available sales charge waivers.” In July 2015, FINRA ordered five (5) other firms to pay an estimated $55 million in restitution for a similar failure.

Jacko Law Group, PC (“JLG”) can review and asses your firms sales practices and provide training and mentoring to ensure that brokers are being adequately supervised. For more information or to speak with a securities attorney on this and other related subjects, please contact us at info@jackolg.com or (619) 298-2880.

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Filed under Broker-Dealers, FINRA

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