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July 03, 2013 at 08:51 AM
Ameriprise Financial Fined, Censured for Prospectus Delivery Failures
FINRA censured Ameriprise Financial and fined the firm $525,000 after it determined that Ameriprise failed to satisfy the requirement that it deliver prospectuses to mutual fund customers within three days of a purchase transaction. The firm neither admitted nor denied the findings but consented to the sanctions.
Ameriprise used third-party providers to deliver prospectuses for the mutual funds it sold. While it provided electronic information to the firms that were contracted to furnish the prospectuses, it did not check that they did so and had no processes or procedures in place to do so on a daily or weekly basis.
Ameriprise did have a requirement for a monthly review of a sample of transactions, but the requirement failed to describe specifically what the reviewer was required to look for, or which actions the reviewer must take if deficiencies in prospectus delivery were found.
While the main reason for the delivery failures was found to be a failure on the part of the mutual fund companies to have on hand adequate paper copies of their prospectuses, which meant that when the third-party providers requested copies there were none to be had to meet the three-day deadline.
Ameriprise never acted to make sure that prospectuses were delivered on time, either. Its main service provider offered print-on-demand (POD) capability to its clients, which would allow the needed copies to be printed and delivered in time. But Ameriprise never used the service until later on. As a result, many customers never received the prospectuses or the disclosures they contained by the settlement date.
Ameriprise executed more than 15 million transactions that required delivery of a prospectus or summary prospectus, and was therefore required to have in place procedures to monitor prospectus delivery to ensure that customers received them in a timely manner. Instead it relied on its third-party providers to do the job, without adequately supervising them or the process or taking action to correct failures.
