BD Pays $2.3 Million for Sales Charge Violations

A large retail broker-dealer agreed to pay $2.3 Million in restitution because the firm failed to offer load-waived class A shares.  Instead, the eligible customers – retirement plans and charitable organizations – either paid the loads or were directed to higher-expense Class B or C shares.  FINRA faults the firm for over-relying on its financial advisers to determine the applicability of sales charge waivers while failing to properly notify and train them.  Also, the firm failed to adopt adequate controls to detect clients that were entitled to the waivers.  The firm was not fined, presumably because FINRA lauded the respondent for detecting and self-reporting the issues.

OUR TAKE: An adequate compliance program cannot rely on those that need to be monitored to effect proper compliance and surveillance.  An independent function should be tasked with surveillance and implementation.

http://disciplinaryactions.finra.org/Search/ViewDocument/68584