FINRA hit five broker-dealers with $18 million in sanctions for overcharging clients and charities on mutual funds.
Edward Jones faces the largest penalty: $13.5 million. Stifel was hit with $2.9 million, Janney Montgomery Scott with $1.2 million and AXA Advisors with $600,000. Stephens, a financial services firm based in Little Rock, Ark., was ordered to pay $150,000.
The firms had failed to waive mutual fund sales charges for eligible clients at various times since 2009, FINRA says. Moreover, the firms lacked adequate supervisory mechanisms, FINRA says.
The regulator ordered the five to pay restitution to more than 25,000 affected retirement accounts of clients and charities.
The firms neither admitted nor denied the charges, but accepted FINRA's findings, according to the regulator.
An Edward Jones spokesman says in a statement the St. Louis brokerage firm is working quickly to refund any overcharges, has cooperated fully with FINRA and is pleased to have the matter resolved.
"Following FINRA settlements with other firms in 2014, Edward Jones began a thorough review of firm practices related to granting mutual fund sales charge waivers on certain accounts," the spokesman says. "As a result of this review, Edward Jones is simplifying the mutual funds offerings for some firm-held retirement accounts to help ensure this problem doesn't occur in the future."
A spokeswoman for Janney says the firm fully cooperated with FINRA, and notes that the regulator recognized Janney "for its cooperation to identify the issue proactively, review and adjust internal policies and procedures as needed, establish a plan to identify and refund existing clients where applicable, and work to achieve greater transparency regarding mutual fund share classes for clients overall moving forward."
An AXA spokeswoman, noting the firm's cooperation with FINRA's investigation, says "our customers come first and we strive to adhere to the best practices of our industry and to all applicable regulatory requirements."
This is not the first time that FINRA has reprimanded firms for overcharging on mutual funds. In July, Wells Fargo, Raymond James and LPL were also ordered to pay restitution to overcharged clients. FINRA ordered those three firms to pay $30 million.
In total, about $55 million will be paid to 75,000 affected clients.
"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. Cooperation credit was granted to those firms that were proactive in identifying and remediating instances where their customers did not receive applicable discounts," Brad Bennett, FINRA's chief of enforcement, says in a statement.
Stifel and Stephens declined to comment.
Register or login for access to this item and much more
All On Wall Street content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access