The Financial Industry Regulatory Authority (FINRA) announced that because of its mutual fund waiver initiative, it has arrived at a settlement with 56 broker-dealers that will provide almost 110,000 retirement and charitable accounts with $89M in restitution. Two of the firms, Western International Securities and Park Avenue Securities, settled on the same day that the self-regulatory organization (SRO) announced the multi-firm resolution. According to FINRA, the brokerage firms neglected to wave mutual fund sales charges for accounts that were eligible and they did not properly supervise the sales.
FINRA’s Mutual Fund Waiver Initiative
FINRA launched its mutual fund waiver initiative in 2016 after arriving at a settlements with 10 member firms that self-reported how, going as far back as 2009, their registered representatives did not always apply sales waivers when warranted to the accounts of charitable and retirement plan accounts that bought mutual fund shares. While mutual funds are offered in different share classes and usually charge a sales fee upfront, a lot of the funds will waive the upfront fee on the more expensive Class A shares for certain retirement accounts and charities. The SRO also found that the firms had failed to adequately supervise these transactions, which could have helped to ensure that the mutual fund sales waivers were granted.