FINRA Orders Three Firms to Pay More Than $30 Million in Restitution for Mutual Fund Overcharging

Representing Investors Nationwide

Last week, the Financial Industry Regulatory Authority (FINRA) announced the regulator has ordered Wells Fargo Advisors, LLC, Wells Fargo Advisors Financial Network, LLC, Raymond James & Associates, Inc., Raymond James Financial Services, Inc. and LPL Financial LLC to pay more than $30 million in restitution, for failing to waive mutual fund sales charges for certain charitable and retirement accounts. Wells Fargo, Raymond James and LPL will pay affected customers an estimated $15 million, $8.7 million and $6.3 million, respectively.

Mutual funds offer several classes of shares, each with different sales charges and fees.  Customarily, Class A shares have lower fees than Class B and C shares, but A shares charge customers an initial sales charge. Many mutual funds waive their upfront sales charges for certain types of retirement accounts, and some waive these charges for charities.

Although Wells Fargo, Raymond James, and LPL offered these waivers to charitable and retirement plan accounts under limited circumstances, at various times since at least July 2009, the three brokerage firms did not waive the sales charges for affected customers when they offered Class A shares.  As a result, more than 50,000 eligible retirement accounts and charitable organizations at these firms either paid sales charges when purchasing Class A shares, or purchased other share classes that unnecessarily subjected them to higher ongoing fees and expenses. 

Wells Fargo, Raymond James and LPL failed to adequately supervise the sale of mutual funds that offered sales charge waivers. The firms unreasonably relied on financial advisors to waive charges for retirement and eligible charitable organization accounts, without providing them with critical information and training.  As is typical in such settlements,  Wells Fargo, Raymond James, and LPL neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

The experienced securities litigation attorneys at Colling Gilbert Wright & Carter have litigated and resolved hundreds of FINRA arbitration claims. If you believe you lost money due to negligence or fraud on the part of your FINRA registered broker dealer, please contact us for a free case evaluation.