The Financial Industry Regulatory Authority said that a UBS Group AG (UBS) unit will pay $250K to resolve charges accusing it of not waiving certain fees for mutual fund customers that were eligible for the reduction. FINRA said that the broker-dealer overcharged customers $277,636 to invest in mutual funds. The failure to wave these fees purportedly took place from 9/09 to 6/13.
The self-regulatory organization cited alleged supervisory failures. According to the settlement notice, UBS depended largely on its registered representatives to identify when sales charge waivers were warranted and identifying them. These waivers were linked to the reinstatement rights that let investors get around having to pay front-end sales charges.
Under these rights, individual investors are generally allowed to reinvest money made from selling class A mutual fund shares in the same fund family or the same fund without having to pay fees at the front end. They are given 90-120 days to reinvest for the waiver to be applicable.
FINRA said the lack of supervisory procedures to test or assess how accurate the brokers’ reports were regarding this matter caused UBS to neglect to give about 2,700 customers the mutual fund fee waivers to which they were entitled. The financial firm has since paid all of them back.
This is not the first time UBS has been fined for upfront fees. In 2008, the broker-dealer also agreed to pay $250K for its lack of a supervisory system to make sure that investors were given the chance to buy class A mutual fund shares at net asset value without having to pay an initial sales charge. 12 years ago, UBS consented to pay a $2.3M fine over claims that it did not provide certain mutual fund customers breakpoint discounts.
Meanwhile, FINRA has been cracking down on violations of fund failures for some time. Earlier this year, it told Robert W. Baird & Co. to pay $2.1M over fees that were not waived for certain retirement accounts and charitable organizations. Last year, the SRO ordered the following firms to pay back customers over $30M collectively for not waiving mutual fund sales charges on behalf of certain retirement and charitable accounts:
· Raymond James Financial Services (RJF)
· LPL Financial LLC(LPLA)
· Wells Fargo Advisors Financial Network (WFC)
· Raymond James & Associates
If you believe your investment losses are due to mutual fund fraud, contact Shepherd Smith Edwards and Kantas, LTD LLP today.
Finra fines UBS $250,000 for overcharging mutual-fund customers, InvestmentNews, August 16, 2016
Finra Orders Wells Fargo, Raymond James, LPL to Pay $30 Million to Clients, The Wall Street Journal, July 6, 2016