FINRA fines broker-dealer for failing to apply Class A sales charge waivers for certain eligible customers on its mutual fund platform

Abstract

Purpose

To review FINRA enforcement action taken against a broker-dealer over failure to waive mutual fund sales charges for certain eligible customers and failure to establish, maintain, and enforce a supervisory system and written procedures reasonably designed to ensure eligible accounts received sales charge waivers as set forth in the mutual funds’ prospectuses.

Design/methodology/approach

Reviews and summarizes FINRA’s finding’s regarding the broker-dealer’s failure to apply applicable mutual fund sales charge waivers, deficiencies in the broker-dealer’s supervisory system and written procedures resulting in the failure, resulting violations of FINRA rules, the broker-dealer’s remedial efforts, and the sanctions imposed.

Findings

This settlement provides an important reminder for FINRA member broker-dealers of the need to ensure that eligible investors receive applicable sales charger waivers or are placed in the appropriate share class, and to establish, maintain, and enforce a supervisory system and written procedures reasonably designed to ensure eligible accounts received sales charge waivers as set forth in the mutual funds’ prospectuses.

Originality/value

Practical explanation from experienced financial institutions lawyers.

Citation

F. Kerr, R. (2014), "FINRA fines broker-dealer for failing to apply Class A sales charge waivers for certain eligible customers on its mutual fund platform", Journal of Investment Compliance, Vol. 15 No. 4, pp. 53-56. https://doi.org/10.1108/JOIC-09-2014-0045