FINRA slapped Merrill Lynch with an $8 million fine, and ordered the firm to repay $24.4 million in mutual fund fee overcharges allegedly passed on to retirement plan and charity account holders.
The self-regulatory organization alleges that Merrill at various times didnt waive upfront sales charges for affected customers when offering Class A shares. While most funds on Merrills retail platform offer such waivers, according to FINRA, about 41,000 small business retirement plans, and 6,800 charity and 403(b) retirement accounts were still affected.
FINRA alleges that Merrill learned that some of its customers were overpaying in 2006, but continued charging them the more costly shares, and failed to report the matter to regulators.
Merrill neither admitted nor denied the charges, according to FINRA.
Brad Bennett, executive vice president and chief of enforcement at FINRA, released a statement saying the significant restitution reinforces that investors must be able to trust that their brokerage firm will offer the lowest-cost share classes available to them. When firms fail to do so, we will take appropriate action."
Merrill has already repaid $64.8 million to affected customers after notifying FINRA in 2011, according to spokesman Bill Halldin. He says the discrepancies occurred in certain types of small business retirement accounts, but not in individual brokerage accounts or IRAs.
FINRA explained that Merrill had not adequately supervised sales of the shares, nor properly trained and notified advisors about lower-cost alternatives. Merrill has since addressed the problem with improved training and education, Halldin said.
The disciplinary action comes on the heels of a $1 million fine levied against Merrill for submitting incomplete blue sheets. The reports were missing key stock and trade-related transactions, while others included inaccurate data, according to FINRA.
- FINRA Fines Barclays Capital, Goldman Sachs and Merrill Lynch $1M Each
- Finra Fines JPMorgan 3 Minutes of Profit for Errant Bond Reports
- Should Firms Settle Regulatory Cases? Study Says No