The Financial Industry Regulatory Authority (FINRA) slammed Bank of America Merrill Lynch with an $8 million fine and an $89 million restitution order for failing to waive mutual fund sales commission charges related to certain charities and retirement accounts. Merrill Lynch agreed to the settlement without admitting or denying FINRA’s findings that even though most of the mutual funds on Merrill Lynch’s retail platform waive certain fees for eligible retirement plans and charities, the firm failed to make sure its advisers were properly applying those waivers to as many as 41,000 accounts. FINRA further stated that Merrill Lynch’s written supervisory procedures provided little information or guidance on mutual fund sales charge waivers.
From approximately 2006 to 2011, Merrill Lynch advisers placed tens of thousands of accounts into Class A mutual fund shares and other funds with the promise of waiving upfront or back-end sales charges for retirement accounts and charities. However, FINRA found that Merrill Lynch failed to make sure that all fees were being waived. Even after Merrill Lynch learned that it was not providing sales charge waivers to eligible accounts, the firm still relied on its financial advisers to waive the charges. Consequently, FINRA found that Merrill Lynch failed to adequately supervise the sale of these products or properly train or notify its financial advisers about lower-cost alternatives. Moreover, FINRA found that although Merrill Lynch learned of the issue as early as 2006, the firm failed to notify FINRA until 2011.
This is not the first time Merrill Lynch has been fined for overbilling. In 2012, the firm paid a $2.8 million fine for allegedly overcharging nearly 95,000 customers as much as $32 million in investment advisory fees. In that case, FINRA stated that the firm’s systems had failed to identify accounts that were entitled to pay a lower percentage of fees.
In order to protect customers, FINRA rules require broker-dealers to establish and implement a reasonable supervisory system. These rules require supervisors to monitor firm activities to ensure they comply with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker-dealers do not establish and implement such protective measures, they may be liable to account holders for damages stemming from a lack of supervision. As a result, investors who have paid excess fees, commissions, or other charges can bring forth claims to recover damages against broker-dealers like Merrill Lynch, which have a duty to oversee sales activities in order to protect their customers’ interests.
Have you paid excess fees, commissions, or other charges in your Merrill Lynch or other investment account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against stockbrokers for unsuitable recommendations, misrepresentations, and/or other fraudulent and illegal conduct.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over , Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities, and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please post a comment, call (800) 732-2889, send Mr. Pearce an email at firstname.lastname@example.org, and/or visit our website at www.secatty.com for answers to any of your questions about this blog post and/or any related matter.