MutualFundWire.com: Five B-Ds Dodge Fines, But Not Restitution, Over Un-Waived Loads

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Monday, July 6, 2015

Five B-Ds Dodge Fines, But Not Restitution, Over Un-Waived Loads

Five more big broker-dealers have landed in hot water with Finra over potentially un-waived mutual fund loads. Yet the water isn't as hot as it could have been.

Today the independent regulatory agency ordered LPL Financial, Raymond James & Associates, Raymond James Financial Services, Wells Fargo Advisors, and Wells Fargo Advisors Financial Network to pay more than $30 million in combined restitution, including interest: about $15 million to Wells customers, $8.7 million to RayJay customers, and $6.3 million to LPL ones. Yet the B-Ds were not ordered to pay fines, too.

Under the orders, LPL, RayJay, and Wells neither admitted nor denied Finra's charges. Jack Grone, senior vice president and director of communications at Wells Fargo Advisors, told MFWire that the B-D is "not making any comment on the Finra announcement."

The orders revolve around retirement plan and charity clients of the B-Ds who, according to Finra, qualified for waived loads on A shares but didn't get the waivers. The case follows a similar Finra enforcement action a year ago, against Merrill Lynch.

In the new orders involving LPL, RayJay, and Wells, Finra notes that each B-D began investigations into the practices in June 2014, when Finra took action against Merrill, and LPL, RayJay, and Wells each reported their concerns to Finra in the fall.

Thus, while last year Finra ordered Merrill to pay an $8 million fine plus $97.2 million in restitution, this time around the B-Ds are being ordered to pay only restitution.

"While Wells Fargo, Raymond James and LPL failed to ensure that customers received these discounts, Finra's sanctions acknowledge that the firms detected and self-reported these errors, and will provide full restitution to customers," states Brad Bennett, executive vice president and chief of enforcement at Finra.

Lauren Hoyt-Williams, senior public relations consultant for LPL, emailed MFWire a statement on Finra's action:

"In its notice of Acceptance, Waiver and Consent (AWC) document, Finra recognized LPL for its 'extraordinary cooperation' for initiating the investigation into the matter, promptly establishing a plan for remediation for those impact, implementing steps to correct the issue, and self-reporting the issue to Finra.

LPL self-reported this issue, and we are addressing it to help uphold our commitment to serving the best interest of investors. Importantly, there are no fines associated with this agreement as a result of our ongoing efforts to ensure a proper resolution of this issue for investors.

LPL has begun providing restitution to affected investors as well as implementing process changes to further protect investors for this issue in the future."

Steve Hollister, director of public communications for RayJay, also provided a statement on the orders:

As noted by Finra, Raymond James discovered the issue internally, proactively initiated client refunds and self-reported the findings to Finra. Given the firm's extraordinary cooperation, Finra waived any fines which would have otherwise been assessed. We are pleased to have the issue resolved.