Firms Did Not Provide Fee Waivers in Connection with Mutual Fund Purchases
FINRA has ordered three firms—Edward Jones, Osaic Wealth, Inc. and Cambridge Investment Research, Inc.—to pay more than $8.2 million in restitution to customers who were harmed by the firms’ failures to provide available mutual fund sales charge waivers and fee rebates on mutual fund purchases. FINRA did not impose any fines in connection with these matters in recognition of each firm’s extraordinary cooperation with FINRA’s investigations.
The three settled matters are each the result of a targeted examination initiated in 2020 and executed by Member Supervision’s Examinations and National Cause and Financial Crimes Detection programs. Including today’s settlements, FINRA has secured over $9.5 million in restitution for affected mutual fund customers across five firms.
“Obtaining restitution for harmed customers is a top priority for FINRA. It is essential that firms ensure their customers receive all fee waivers and rebates owed,” said Bill St. Louis, Executive Vice President and Head of Enforcement at FINRA. “At the same time, FINRA recognizes firms that proactively correct errors, identify and repay harmed investors and provide substantial assistance to FINRA during its investigations.”
Many mutual fund issuers offer a right of reinstatement, which allows investors to reinvest in shares of a fund or fund family after previously selling shares without incurring a front-end sales charge, or to recoup all or part of a contingent deferred sales charge.
Each of the three firms failed to establish and maintain a supervisory system reasonably designed to supervise whether eligible customers received available mutual fund sales charge waivers and fee rebates through rights of reinstatement. As a result, customers did not receive the rights of reinstatement benefits to which they were entitled, totaling over $8.2 million.
Edward Jones customers paid $4,440,979 in excess sales charges and fees; Osaic Wealth customers (and those of its affiliated broker-dealers) paid $3,096,490 in excess sales charges and fees; and Cambridge Investment Research customers paid $699,217 in excess sales charges and fees. Each of the firms agreed to repay affected customers, including interest.
Each firm demonstrated extraordinary cooperation by voluntarily initiating an extensive review of their relevant systems, practices and procedures; engaging an outside consultant to identify disadvantaged customers and calculate restitution; and establishing a plan to efficiently identify, notify and repay customers eligible for restitution.
In settling these matters, the three firms consented to the entry of FINRA’s findings, without admitting or denying the charges.
FINRA makes available disciplinary actions and other information on its Disciplinary Actions Online database. In addition, FINRA publishes on its Monthly Disciplinary Actions page a summary of disciplinary actions against firms and individuals for violations of FINRA rules; federal securities laws, rules and regulations; and the rules of the Municipal Securities Rulemaking Board.
About FINRA
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. FINRA regulates one critical part of the securities industry—member brokerage firms doing business in the U.S. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.
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