BD Will Pay $13.75 Million for Unsuitable Mutual Fund Recommendations
A large broker-dealer agreed to pay $13.75 Million in disgorgement, fines, and interest for unsuitable mutual fund recommendations and allowing improper fund switching. FINRA alleges that the firm improperly defined the term “mutual fund switch,” thereby allowing over 6,000 unsuitable switching transactions over a 5-year period. FINRA also alleges that the firm failed its suitability obligations in nearly 40% of recommendations and often failed to provide mutual fund breakpoint discounts.
OUR TAKE: We recommend that firms conduct an annual, independent review of suitability compliance in order to uncover systemic failures.