A broker-dealer agreed to settle FINRA charges for failure to identify and apply mutual fund sales charge waivers to eligible retirement accounts and charitable organizations. FINRA also charged the broker-dealer for neglecting to supervise the application of waivers to qualified mutual fund sales. As part of the settlement, the broker-dealer agreed to a censure, and to provide remediation to impacted customers.
According to the Letter of Acceptance, Waiver, and Consent, FINRA claimed that Commonwealth Financial Network ("Commonwealth") failed to teach its financial advisors how to determine the applicability of sales charge waivers. FINRA stated that Commonwealth also failed to adopt necessary controls to expose instances in which sales charge waivers were not given to eligible customers in connection with their mutual fund purchases.
In resolving the matter, FINRA acknowledged the extensive cooperation that Commonwealth provided. In particular, Commonwealth:
- initiated an investigation to figure out whether eligible customers received sales charge waivers;
- expanded the relevant period of applicable transactions, which led to further restitution to additional customers;
- took prompt action to correct the misconduct; and
- employed corrective measures to avoid repeating the violations.
Commentary / Kyle DeYoung
More welcome news from FINRA. This is the second recent case where it did not impose a monetary fine where the firm cooperated extensively with the investigation and voluntarily made restitution to customers. If FINRA continues this approach with consistency, firms will be encouraged to voluntarily identify problems and make customers whole on their own.
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