The Financial Industry Regulatory Authority (FINRA) has ordered five firms to pay more than $18 million, including interest, in restitution to affected customers after it found that they had failed to waive mutual fund fees for eligible charitable organizations and retirement accounts.
The firms, and the restitution amounts they were ordered to pay, are the following:
Edward D. Jones & Co., L.P., $13.5 million
Stifel Nicolaus & Company, Inc., $2.9 million
Janney Montgomery Scott, LLC, $1.2 million
AXA Advisors, LLC, $600,000
Stephens Inc., $150,000
Although mutual fund class A shares typically have lower fees than other share classes, they generally collect an initial sales charge from customers.
However, many mutual funds waive those upfront class A charges for certain types of retirement accounts, and some waive them for charities.
FINRA found that, although the mutual funds available on the firms’ retail platforms offered these waivers to charitable and retirement plan accounts, at various times since at least July 2009, the firms did not waive those charges for affected customers when they offered Class A shares.
As a result, more than 25,000 eligible retirement accounts and charitable organizations at these firms either paid sales charges when purchasing Class A shares, or purchased other share classes that unnecessarily subjected them to higher ongoing fees and expenses.