Wells Fargo, LPL, Raymond James to reimburse $30 million in fees: FINRA

[July 07, 2015]  By Suzanne Barlyn

(Reuters) - Three major securities brokerages must collectively reimburse customers more than $30 million for failing to waive mutual fund sales charges for thousands of accounts belonging to charities and retirement investors, Wall Street's watchdog said on Monday.

Units of Wells Fargo & Co, Raymond James Financial Inc and LPL Financial Holdings Inc "failed to adequately supervise" the sale of mutual funds that offered sales charge waivers, the Financial Industry Regulatory Authority (FINRA) said in a statement.

The firms, in settling the cases with FINRA, neither admitted nor denied the industry-funded regulator's allegations, FINRA said.

A Wells Fargo spokesman declined to comment. Raymond James and LPL said in statements that they self-reported the problem to FINRA, which did not impose fines, given the firms' "extraordinary cooperation."

The overcharges involve Class A shares, which have lower fees than Class B and C shares, but require an initial sales charge. Many mutual funds, however, waive the upfront sales for certain types of retirement accounts and charities.

Wells Fargo, Raymond James, and LPL had offered these waivers and disclosed them in their prospectuses, FINRA said.

The case is similar to one FINRA brought last year against Bank of America’s Merrill Lynch unit, which resulted in the firm paying an $8 million fine.

FINRA's Merrill case prompted some firms to review their practices to see whether they also had failed to provide the sales charge discounts that mutual fund issuers had made available to retirement accounts and charities, said Bradley Bennett, FINRA’s enforcement chief, in a June interview.

The firms had self-reported their overcharges to FINRA, leading to an investigation, Bennett had said at the time without identifying the firms.

Wells Fargo, Raymond James and LPL will pay affected customers an estimated $15 million, $8.7 million and $6.3 million, respectively.

The errors at the three companies have affected a total of more than 50,000 accounts at the firms since at least 2009, FINRA said.

All three firms "failed to adequately supervise" the sale of mutual funds that offered sales charge waivers, FINRA said. The firms "unreasonably relied" on financial advisors to waive the charges for retirement and eligible accounts for charities, without giving the advisers "critical information and training," FINRA said.

(Reporting by Suzanne Barlyn; Editing by Bernadette Baum and Paul Simao)

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