Securities America has agreed to pay over $1.5 million in restitution tied to mutual fund overcharges paid by 1,514 clients over six years, according to the Financial Industry Regulatory Authority.
The independent broker-dealer, which is owned by Ladenburg Thalmann (LTS) and has some 2,000 affiliated advisors, finalized the arrangement on Friday, without admitting or denying the findings. (Ladenburg Thalmann is set to post its second-quarter earnings on Thursday.)
According to FINRA, the IBD “disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares … without a front-end sales charge.” Instead, between July 2009 and July 2015, the clients were sold A shares with front-end charges as well as B and C shares with back-end sales charges and higher ongoing fees and expenses.
“During this period, [Securities America] failed to establish and maintain a supervisory system and procedures reasonably designed to ensure that eligible customers who purchased mutual fund shares received the benefit of applicable sales charge waivers,” FINRA said.
“Many U.S. broker-dealers, including Securities America, missed sales charge waivers afforded certain client account types in mutual funds,” the broker-dealer said in a statement. “Securities America undertook its own analysis of our data and self-reported our findings to FINRA. We are in the process of reimbursing clients adversely impacted and are pleased to resolve this matter.”
The overcharges totaled about $1.39 million, but the IBD also will pay interest to clients as part of the deal reached with FINRA.
The regulator says it recognizes “the extraordinary cooperation” of Securities America, which initiated an investigation of the overcharges before the regulator started its investigation. The IBD also “promptly established a plan of remediation,” it adds.
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