Securities Arbitration Lawyers BlogFINRA Fines Cetera Almost $2 Million for Mutual Fund Sales Charge Violations
FINRA entered into a settlement with Cetera Advisor Networks LLC (CRD# 13572) over improprieties related to mutual sales fund charge waivers.
According to the Acceptance, Waiver and Consent (“AWC’) entered into between Cetera and FINRA, Cetera disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase certain shares in mutual funds without a front-end sales charge. Instead, Cetera sold these customers shares with front-end or back-end sales charges and higher ongoing fees and expenses.
Cetera did not waive the additional mutual fund sales charge even though customers qualified for it and, according to the AWC, Cetera carried on this conduct between July 2009 and January 2017.
According to the AWC, FINRA found that Cetera failed to reasonably supervise the application of sales charge waivers to eligible mutual fund sales. Cetera relied on its financial advisors to determine the applicability of sales charge waivers but failed to maintain adequate written policies or procedures to assist financial advisors in making this determination.
In total, according to the AWC, it is estimated that Cetera overcharged its customers by at least $1.66 million for mutual fund purchases.
As part of Cetera’s settlement with FINRA, Cetera agreed to pay restitution to aggrieved customers in the amount of at least $1.9 million.
Our attorneys have seen quite a few brokerage firms get fined over a failure to apply mutual fund sales charge waivers to their customer accounts. This includes IFC Holdings Inc. dba Invest Financial Corporation (CRD# 12984), Investment Centers of America, Inc. (CRD# 16443), National Planning Corporation (CRD# 29604), and SII Investments, Inc. (CRD# 2225). All of these firms were fined in FINRA’s April Disciplinary Report.
Cetera Advisor Networks is part of Cetera Financial Group’s extensive network of independent brokerage firms, many of which came to be owned by Nicholas “Nick” Schorsch and RCS Capital Corp. when they went on an acquisition spree to acquire brokerage firms.
Cetera Financial Group has made a concerted effort to close some of the acquisitions and consolidate, including J.P. Turner & Company (CRD# 43177), VSR Financial Services, Inc. (CRD# 14503), and Investors Capital Corp. (CRD# 30613). Additionally, Cetera Financial Group has done its best to distance itself from Schorsch and his companies, even changing the name of RCS Capital to Aretec, Cetera spelled backwards, after it emerged from bankruptcy.
Many of the firms under then Cetera network have a history of selling alternative investments, including Schorsch and RCS Capital’s penchant business development companies (“BDCs”), non-traded REITs, oil and gas drilling partnerships, and private placements. Our firm has compiled a list of some of the non-traded REITs and BDCs. Further, five Cetera firms were fined recently for alleged misconduct related to L-share variable annuities, including Summit Brokerage Services.
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Silver Law Group represents the interests of investors who have been the victims of investment fraud nationwide. If you have questions about your legal rights, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.