The Financial Institutions Regulatory Authority says a member firm should have been more careful to ensure that customers enrolled in a fee-based brokerage account program were getting good deals.
FINRA, Washington, will be collecting $1.2 million in fines from AXA Advisors L.L.C. in connection with concerns about monitoring of the company’s old fee-based CapAdvantage brokerage accounts.
FINRA also is requiring AXA Advisors to give $1.4 million in fees back to CapAdvantage account customers, and AXA Advisors has volunteered to give back another $1.2 million in fees, according to FINRA officials.
AXA Advisors is a unit of AXA Financial Inc., New York, which, in turn, is a unit of AXA S.A., Paris.
AXA Advisors has agreed to settle the CapAdvantage account matter without either admitting or denying FINRA’s allegations, and it notes that it brought some of the CapAdvantage account concerns to FINRA’s attention..
AXA Advisors “has completed payment of restitution to all affected customers,” the company says in a statement.
AXA Advisors also has dropped the CapAdvantage accounts from its product platform, the company says.
AXA Advisors designed the CapAdvantage accounts for investors with at least $50,000 in assets who engaged in at least some trading.
“While the firm instructed its brokers that low balance accounts, infrequently traded accounts, and several other classes of accounts required close monitoring, it failed to adequately supervise for these issues,” FINRA officials allege.
Between 2001 and 2005, many investors with less than $50,000 in assets opened CapAdvantage accounts, and account fees ate up all of the assets of one customer who started a fee-based account with just $2,000, officials allege.
Other CapAdvantage customers were a poor fit for the accounts because they rarely engaged in trading, officials allege.
FINRA found that AXA Advisors took about 3 years to develop reports that could flag potential problem CapAdvantage accounts.
In addition, AXA Advisors charged some CapAdvantage customers fees before they had $50,000 in CapAdvantage assets, even though account marketing materials indicated that AXA Advisors would wait to charge asset-based fees until an account held at least $50,000 in assets.
The settlement fee refunds will go to CapAdvantage customers who either did no trades for 2 years, or had less than the required minimum account balance for a year and were charged fees, or were charged fees before reaching the asset level that the firm said would trigger asset-based fees, officials say.