FINRA Orders 3 Firms to Pay $30 Million for Not Waiving Mutual Fund Sales Loads

FINRA ordered three large broker-dealers to pay a combined $30 Million in restitution to retirement and charitable accounts entitled to mutual fund sales load waivers.  Over 50,000 accounts purchased lower-fee Class A shares since 2009 but did not receive the waivers described in the prospectuses.  According to FINRA, the firms “unreasonably relied on financial advisors to waive charges for retirement and eligible charitable organization accounts, without providing them with critical information and training.”

OUR TAKE: Firms cannot issue compliance edicts and rely on sales personnel to execute them.  Firms must train the affected personnel, create systems that prevent violations, and test compliance on a regular basis.  Otherwise, firms will get tagged for failing to supervise.