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Retirement Planning > Saving for Retirement

FINRA cracks down on overcharges to 401(k) plans

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Three titans of the broker world will pay a combined $30 million in restitution to more than 50,000 retirement accounts and charitable organizations after the firms failed to waive fees on mutual funds.

The Financial Industry Regulatory Authority ordered the advisor channels of Wells Fargo, Raymond James, and LPL Financial to make retirement investors whole after accounts were charged fees on Class A shares of mutual funds when investors qualified to have those fees waived.

In a statement, FINRA said each firm detected and self-reported the errors, which is why the regulator did not levy fines. Wells Fargo will return $15 million in fees and interest, and Raymond James and LPL will return $8.7 million and $6.3 million respectively.

Fees on retail shares of mutual funds are often waived when offered to participants in workplace savings plans to maintain compliance with the Employee Retirement Income Security Act.

The infractions occurred beginning in July 2009 after the firms “unreasonably relied on financial advisors to waive charges,” according to a statement from FINRA. The statement did not say if the failure to waive the charges was intentional, but only that the firms failed to provide “critical information and training” to their sales forces.

The three firms neither admitted nor denied the charges in consenting to the FINRA action.

Last year, Merrill Lynch was fined $8 million and ordered to repay $89 million to 401(k) and 403(b) investors after failing to waive fees to more than 41,000 small business retirement accounts since 2006.

In that action, FINRA alleged that Merrill Lynch was aware of the overcharges as early as 2006 but failed to take corrective action.

Read: Do you have a personal pension plan?

Those charges, and the extent of the repayments and fines, prompted other broker-dealers and wirehouses to review whether advisors have overcharged retirement investors.

In June, Brad Bennett, FINRA’s chief of enforcement, tipped the regulator’s hand when he suggested action against other firms for overcharging retirement accounts was in the offing, but he did not name Wells Fargo, Raymond James or LPL when addressing the matter at an industry compliance conference.

Edward Jones, the St. Louis-based privately held broker-dealer, also recently disclosed that it was reviewing whether its advisors had failed to waive fees on shares offered to retirement plans. No regulatory action has been brought against Edward Jones.


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