U.S. regulators have fined Merrill Lynch and ordered it to pay restitution to clients who were overcharged when they bought mutual funds from the firm.

The Financial Industry Regulatory Authority (FINRA) announced Monday that it fined Merrill Lynch, Pierce, Fenner & Smith, Inc. US$8 million for failing to waive mutual fund sales charges for certain charities and retirement accounts. It also ordered the firm to pay a further US$24.4 million in restitution to affected customers, on top of the US$64.8 million that it has already repaid to investors. The firm settled the allegations, neither admitting nor denying the charges; it consented to the entry of FINRA’s findings.

The regulator says that the firm did not waive upfront sales charges for certain mutual funds, which typically don’t levy these charges on retirement accounts, and are often waived for charities. As a result, it reports that approximately 41,000 small business retirement plan accounts, and approximately 6,800 charities either paid sales charges, or purchased share classes that unnecessarily subjected them to higher ongoing fees and expenses.

FINRA says that the firm discovered that its small business retirement plan customers were overpaying in 2006, but continued to sell them more costly shares, and failed to report the issue to FINRA for more than five years.

“Merrill Lynch failed to offer available waivers to customers, including small business retirement accounts and charitable organizations,” said Brad Bennett, FINRA’s executive vice president and chief of enforcement. “FINRA’s commitment to investor protection is highlighted by the significant restitution component of this settlement, which reinforces that investors must be able to trust that their brokerage firm will offer the lowest-cost share classes available to them. When firms fail to do so, we will take appropriate action.”