A trio of U.S brokerage firms have been ordered to pay US$8.2 million in restitution to investors who didn’t get breaks on their mutual fund fees that they were entitled to receive.
In a series of settled enforcement actions, the U.S. Financial Industry Regulatory Authority Inc. (FINRA) ordered the three firms — Edward Jones, Osaic Wealth, Inc. and Cambridge Investment Research, Inc. — to pay back clients that were harmed by their failure to ensure that they received rebates on fund fees or sales charge waivers.
“Each of the three firms failed to establish and maintain a supervisory system reasonably designed to supervise whether eligible customers received available mutual fund sales charge waivers and fee rebates,” the self-regulatory organization (SRO) said in a release on Friday.
The firms settled the SRO’s allegations, without admitting or denying its findings.
In settling, the firms agreed to repay affected investors, with interest.
The SRO did not impose any penalties on the firms, citing their “extraordinary” cooperation with regulators.
“Each firm demonstrated extraordinary cooperation by voluntarily initiating an extensive review of their relevant systems, practices and procedures; engaging an outside consultant to identify disadvantaged customers and calculate restitution; and establishing a plan to efficiently identify, notify and repay customers eligible for restitution,” FINRA said.
According to the SRO, Edward Jones clients paid US$4.4 million in excess sales charges and fees between 2015 and 2020; Osaic Wealth customers paid almost US$3.1 million in excess fees between 2017 and 2022; and, between 2015 and 2022, clients of Cambridge Investment Research paid almost US$700,000 in excess charges.
The failings were uncovered in a compliance sweep launched by the SRO in late 2020, which has now resulted in over US$9.5 million in restitution for affected mutual fund investors.
“Obtaining restitution for harmed customers is a top priority for FINRA. It is essential that firms ensure their customers receive all fee waivers and rebates owed,” said Bill St. Louis, executive vice president and head of enforcement at FINRA, in the release.
“At the same time, FINRA recognizes firms that proactively correct errors, identify and repay harmed investors and provide substantial assistance to FINRA during its investigations,” he added.