In a settlement with the Financial Industry Regulatory Authority, a number of Cetera Financial Group brokerage firms have agreed to collectively pay $3.3M for not properly supervising whether mutual fund sales charge waivers were applied correctly clients at charitable organizations and in retirement plans. The firms that have settled include Cetera Financial Specialists, Cetera Investment Services, Summit Brokerage Services, First Allied Securities, and Girard Securities.
The $3.3M is how much these clients were excessively charged plus interest for the mutual funds that they bought from July 2009 to July 2017. According to the self-regulatory organization, the brokerage firms either: charged front-end sales charges to charitable organization and retirement plan customers that bought A shares in mutual funds even though they were eligible to have these fees waived or sold them class C/B shares while charging them back-end sales charges and “higher ongoing fees and expenses.”
FINRA accused the Cetera firms of not reasonably supervising the way the sales charges waivers were applied to the mutual fund sales and leaving it up to financial advisers to decide whether the waivers should be applied. The SRO also contends that the broker-dealers did not maintain written policies and procedures that were adequate enough to help financial advisers in making such determinations.
The Cetera brokerage firms are settling but without denying or admitting to the charges. Commenting on the case, a Cetera Financial Group spokesperson said that the firm was the one that identified the issue and notified FINRA while making the voluntarily choice to refund the excess sales charges to clients.
The settlement come just three months after FINRA settled with another Cetera broker-dealer, Cetera Advisors Network, for charging charitable organizations and retirement plans almost $1.7M in mutual fund fees that should have been waived. It was also this year that FINRA announced that it was engaging in a “mutual fund waiver sweep” and it wanted brokerage firms to submit information regarding waivers and reimbursements related to mutual fund sales charges.
Cetera broker-dealers to pay back $3.3 million to clients overcharged for mutual funds, InvestmentNews, August 22, 2017
Cetera Financial To Pay $3.3M Over Mutual Fund Fee Errors, Law360, August 22, 2017