Five broker-dealers agreed to pay back US $30 million to retirement accounts and charities for overcharging them mutual fund sales charges following disciplinary actions filed by the Financial Industry Regulatory Authority. The five broker-dealers are Wells Fargo Advisors, LLC, Wells Fargo Advisors Financial Network, LLC, Raymond James & Associates, Inc., Raymond James Financial Services, Inc. and LPL Financial LLC. According to the disciplinary actions filed against each broker-dealer, from at least July 1, 2009, through December 31, 2014, each firm offered mutual funds for retirement accounts and charities without sales charges, but failed to maintain adequate written supervisory procedures reasonably designed to prevent such entities from being assessed sales charges. As a result, the retirement accounts and charities s were wrongfully assessed sales charges at each of the broker-dealers, said FINRA. All the broker-dealers self-discovered and self-reported their issues to FINRA and were cited by FINRA for their “extraordinary cooperation.”
My View: There were no monetary sanctions other than disgorgement ordered by FINRA in connection with these disciplinary actions – and it appears that each broker-dealer was in the process of returning overcharged fees to the customers in any case after discovering and self-reporting their mistakes. This was a judicious application of FINRA’s discretion and hopefully can be repeated by FINRA and other regulators in other disciplinary proceedings where firms discover regulatory breaches on their own, fix them voluntarily, and make recompense to each detrimentally impacted customer (if any). To also assess civil penalties in such circumstances seems overkill. Unfortunately, inadvertent mistakes happen and responsible firms should be encouraged to correct them – not penalized!