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BofA's Merrill fined for mutual fund overcharges

[June 17, 2014]  By Jonathan Stempel

(Reuters) - Bank of America Corp's Merrill Lynch unit was fined $8 million and will reimburse $24.4 million to customers to settle allegations that it overcharged more than 47,000 retirement accounts and charities that invested in mutual funds.

The Financial Industry Regulatory Authority, Wall Street's self-funded regulator, on Monday said the restitution is in addition to $64.8 million that Merrill has already repaid, making the total payout about $97.2 million including the fine.

Like many rivals, Merrill has offered mutual fund shares in multiple classes. Typically, Class A shares carry lower fees than Class B and C shares, but also carry upfront sales charges.

FINRA said Merrill failed to provide promised sales charge waivers on many retirement accounts for more than five years beginning in January 2006, relying instead on financial advisers it did not properly supervise to do so.

As a result, about 41,000 small business retirement plans, and 6,800 charities and 403(b) retirement plan accounts available to ministers and public school employees, improperly paid sales charges on Class A shares or bought other share classes carrying higher fees, FINRA said.

Roughly 16,200 of these accounts will share in the $24.4 million payout, settlement papers show.

"Investors must be able to trust that their brokerage firm will offer the lowest-cost share classes available to them," FINRA enforcement chief Brad Bennett said in a statement.

Merrill neither admitted nor denied FINRA's charges in agreeing to settle.

A spokesman, Bill Halldin, said Merrill notified FINRA and voluntarily began making refunds after discovering the matter, which did not affect individual brokerage accounts or individual retirement accounts.

Bank of America is based in Charlotte, North Carolina, and bought Merrill on Jan. 1, 2009.

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