FINRA Orders Firms to Pay Over $8.2 Million in Restitution to Customers

Table of Contents

01

Firms Failed to Provide Mutual Fund Sales Charges Waivers

02

Targeted Examination by FINRA

03

Rights of Reinstatement and Fee Waivers

04

Details of the Settlement

05

Extraordinary Cooperation by Firms

06

FINRA's Ongoing Commitment to Enforcement

07

Summary

Firms Failed to Provide Mutual Fund Sales Charges Waivers

WASHINGTON—FINRA has ordered three firms—Edward Jones, Osaic Wealth, Inc., and Cambridge Investment Research, Inc.—to pay over $8.2 million in restitution to customers who were harmed by the firms' failure to provide mutual fund sales charges waivers and fee rebates on mutual fund purchases. This decision highlights the importance of ensuring customers receive all available mutual fund sales charges waivers and benefits.

Targeted Examination by FINRA

The three firms settled matters resulting from a targeted examination initiated in 2020. This examination was executed by FINRA‘s Member Supervision’s Examinations and National Cause and Financial Crimes Detection programs. Through these efforts, FINRA has successfully secured over $9.5 million in restitution for affected customers across five firms, underscoring the regulatory bodys commitment to investor protection.

Rights of Reinstatement and Fee Waivers

Many mutual fund issuers offer a right of reinstatement, which allows investors to reinvest in shares of a fund or fund family after previously selling shares without incurring a front-end sales charge. However, the three firms failed to ensure customers received their eligible benefits, including rights of reinstatement that would have waived sales charges. As a result, customers were charged excess sales fees, totaling more than $8.2 million.

Details of the Settlement

Edward Jones customers paid over $4.4 million in excess sales charges, Osaic Wealth customers (and those of its affiliated broker-dealers) paid over $3.1 million, and Cambridge Investment Research customers paid over $699,000. Each firm has agreed to repay affected customers, including interest.

Extraordinary Cooperation by Firms

In recognition of their extraordinary cooperation, the firms voluntarily reviewed their systems and practices, engaged an outside consultant, and developed a plan to identify and repay harmed customers. Despite the violations, no fines were imposed due to their proactive approach.

FINRA's Ongoing Commitment to Enforcement

FINRAs commitment to investor protection is evident through its enforcement actions and efforts to ensure firms comply with regulatory requirements. These actions also serve to highlight the importance of firms maintaining systems to supervise and oversee fee waivers and mutual fund sales charge rebates for their customers.

Summary

FINRAs actions reflect its continued priority of securing restitution for harmed investors. By ordering over $8.2 million in restitution to customers who were charged excess fees, FINRA is reinforcing the critical role of mutual fund sales charge waivers and fee rebates in ensuring fair practices within the securities industry. The firms involved have shown extraordinary cooperation and are committed to making restitution, showcasing the value of proactive compliance and correction in financial services.