Western International Securities in Pasadena, California submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which the firm was censured for allegedly engaging in Multiclass Mutual Fund Abuse and failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to ensure that eligible customers who purchased mutual fund shares received the benefit of applicable sales charge waivers. As a result, Western International Securities violated NASD Conduct Rule 3010, FINRA Rule 3110, and FINRA Rule 2010.
Since November 1995, Western International Securities (Western) has been a member firm of FINRA and holds 177 branch offices. According to the FINRA findings, Western had certain customers who were eligible for waiver of the initial sales charge associated with Class A shares. Instead, Western sold them Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. The FINRA findings stated that 40 of Western’s customers purchased mutual fund shares for which the waiver was not applied and were overcharged by approximately $305,000. In addition to the FINRA findings, Western allegedly failed to notify, train, and assist its financial advisors regarding the mutual fund sales charge waivers.
Class A shares typically are subject to a front-end sales charge when originally purchased and have annual fund expenses. including ongoing distribution and service fees (“fees”) that are typically 0.25 percent. The majority of the front-end charge is paid to the selling broker-dealer as a concession. Investors purchase Class A shares at the applicable Net Asset Value (“NAV”), plus the initial sales charge. Most funds, however, offer certain investors a waiver of the initial sales charge associated with Class A shares under certain circumstances (“sales charge waiver”). Class B and C shares typically do not carry a front-end sales charge but have significantly higher distribution and service fees (typically 1.00 percent) and may be subject to a contingent deferred sales charge (“CDSC”).
Without admitting or denying FINRA’s findings, Western International Securities was censured, fined $75,000, required to provide remediation to eligible customers who did not receive applicable mutual fund sales charge waivers and agreed to pay restitution to the customers in the amount of $375,000.
Stockbrokers have been known to engage in many practices that may violate industry and firm rules, practices, and procedures. In order to protect investors from stockbroker misconduct, FINRA rules require brokerage firms to establish and implement a supervisory system. The implementation of these industry rules requires supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, and the brokerage firm’s own policies and procedures. If broker-dealers and/or their supervisors fail to establish and implement these protective measures, they may be liable to investors for damages which flow from the broker’s misconduct. Therefore, investors who have suffered losses stemming from Multiclass Mutual Fund Abuse, the failure to supervise and/or other misconduct by their broker can file claims to recover damages against broker-dealers, like Western International Securities, which should consistently oversee its brokers’ activities in order to prevent the above-described misconduct.
Have you suffered losses in your account due to Multiclass Mutual Fund Abuse and/or the failure to supervise? 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 Western International Securities stockbrokers who may have engaged in broker misconduct and caused investors’ losses.
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 40 years, 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 visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at email@example.com for answers to any of your questions about this blog post and/or any related matter.