AXA Financial, Inc. is a French insurance company with $1.25 trillion in assets under management and 200,000 employees worldwide. The company operates primarily in Western Europe, North America and the Asia Pacific region with five business segments: Life & Savings, Property & Casualty, International Insurance, Asset Management and Other Financial Services.
Despite its being written in upper case, “AXA” is not an acronym, but was chosen as the firm’s name because it can be pronounced easily by people who speak any language. AXA has roots dating to the 1700’s, and for more than a century was known as Ancienne Mutuelle until renamed Mutuelles Unies 1978 and AXA in 1985.
AXA Advisors is a subsidiary of AXA Financial, which owns as many as 100 other financial companies, including the former Equitable Life Insurance Company, Alliance Bernstein, Sanford C. Bernstein & Co. and the MONY family of companies, with subsidiaries MONY Life Insurance and U.S. Financial Life Insurance. In 2006, through its many subsidiaries, AXA reported $643.4 billion of total client assets under management worldwide and 7,500 representatives.
AXA Financial states: “We provide a broad array of financial services and products that include life insurance and annuities, an asset management account, wrap fee products and fee-based financial planning. We also offer non-proprietary life, annuity and mutual fund products, and asset management, investment banking and brokerage services.”
AXA Financial acquired Wall Street stalwart Donaldson, Lufkin & Jenrette, then sold that firm to Credit Suisse – First Boston to “strengthen AXA’s balance sheet” adding, “AXA Group can now use its stock as an effective currency in the U.S. to make an acquisition.” In another notable move AXA Group bought all the outstanding common stock of AXA Financial to take that company private.
Our law firm represents institutional and individual investors nationwide with significant losses in their portfolios, retirement plans or investment accounts. Our attorneys and staff have more than 100 years of combined experience in the securities industry and in securities law. Several of our lawyers served for years as Vice President or Compliance Officer of brokerage firms.
Each lawyer and staff member of our firm is devoted to assisting investors to recover losses caused by unsuitability, over-concentration, fraud, misrepresentation, self-dealing, unauthorized trades or other wrongful acts, whether intentional or negligent. We have handled over a thousand cases against hundreds of large and small investment firms, including claims against AXA Advisors and/or other divisions of AXA Financial.
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The National Association of Securities Dealers censured and fined AXA Advisors $250,000 for overcharging its clients for mutual fund investments. AXA agreed to the censure and fine without admitting or denying liability.
The NASD found that AXA failed to obtain sales charge waivers for mutual fund customers through net asset value (NAV) transfer programs. NASD also found AXA failed to have an adequate supervisory system in place to identify and provide customers with sales charge waivers to which they were entitled.
Some fund families offer that customers who redeem fund shares for which they paid a sales charge may use the proceeds within prescribed time periods to purchase shares of a new mutual fund without paying another front-end sales load. AXA failed to identify the NAV transfer programs and give customers their benefits. As a result, eligible investors purchased paid front-end sales charges that they should not have paid.
The NASD determined that from February 2000 through July 2003, AXA earned more than $700,000 in revenue on more than $18 million invested by its customers. As part of the settlement, AXA was ordered to provide full restitution to all customers who paid sales charges on purchases that were subject to these programs from February 2000 through February 2004. AXA is also required to retain an independent consultant to review and recommend revisions to its supervisory and compliance procedures and systems in this area.
“When investors are eligible for a discount or sales charge waiver, securities firms must provide them, without exception,” said Mary L. Schapiro, NASD Vice Chairman and President of Regulatory Policy and Oversight. “Securities firms must have the necessary systems and procedures to identify these transfer programs and deliver their benefits to customers.”
AXA Financial and its reinsurance unit fell under scrutiny of the SEC, the New York Attorney General’s Office, Federal Bureau of Investigations, Department of Justice and various other U.S. regulators and law enforcement authorities considering whether to pursue civil and criminal fraud charges against MBIA, the reinsurers involved and/or some of their respective employees.
Whether charges are brought still is to be determined, but regulators clearly are bothered by how the procurement and then immediate payment of $170 million in reinsurance claims could mask the financial results of major bond insurer MBIA. MBIA is a AAA rated company which is itself an the largest insurer of asset-backed securities and municipal bonds.
In a filing with the Securities and Exchange Commission, AXA said the SEC, New York attorney general, “Federal Bureau of Investigations/Department of Justice and various other U.S. regulators and law enforcement authorities” have been seeking information about a 1998 reinsurance transaction with MBIA, as well as “the purchase and/or sale of non-traditional products (including finite reinsurance)” by AXA’s reinsurance business.
The Financial Industry Regulatory Authority says that another five firms must pay restitution to specific retirement and charitable accounts for overcharging them for mutual funds. Edward D. Jones will pay $13.5M, Stifel Nicolaus (SF) will pay $2.9M, AXA Advisors will pay $600K, Janney Montgomery Scott will pay $1.2M, and Stephens Inc. will pay $15K.
The announcement comes just a few months after the self-regulatory organization fined five other firms over $30M for similar violations. Those firms were LPL Financial LLC (LPL), Raymond James Financial Services (RJF), Raymond James & Associates, Wells Fargo Advisors Financial Network, LLC (WFC), and Wells Fargo Advisors, LLC. Due to their purported oversight, over 50,000 charitable organizations and retirement accounts ended up paying too much for their mutual fund shares.
Several share classes are available through mutual funds. Different charges for sales and fees apply. Class A shares typically come with lower yearly fees than that of Class B and Class C shares. However, Class A shares do charges an initial sales fee as well. That said, the mutual funds will waive upfront fees for certain kinds of retirement accounts and charities.
According to FINRA, even though mutual funds on the firm’s platforms offered these waivers at certain points for several years, the firms charged this time did not waive the charges. Over 25,000 eligible charities and retirement accounts ended up paying sales charges that should have been waived when they purchased Class A shares or bought other share classes that subjected them to higher fees and expenses that weren’t needed.
The regulator also says that the firms did not adequately supervise the mutual fund sales at issue and instead depended on financial advisers it did not properly train to waive the sales charges.
Although the firms are settling, they are not denying or admitting to the charges.
At The SSEK Partners Group, our institutional investor fraud law firm helps charities, retirement plans, large trusts, corporations, banks, partnerships, financial firms, municipalities, private foundations, school districts, and high net worth individuals recoup their losses.