FINRA is requiring Edward Jones, Osaic and Cambridge Investment Research to collectively pay more than $8.2 million in restitution to clients after the firms allegedly failed to monitor whether their clients could take advantage of fee waivers or discounts on certain securities sales. mutual funds.
Settlements are derived from a targeted examination launched in November 2020 from FINRA's Member Supervisory Examinations and National Financial Crimes Investigations programs.
The firms did not admit or deny the findings, and FINRA did not impose any fines because of the firms' cooperation with regulators.
“It is critical that firms ensure that their clients receive all fee waivers and discounts they are owed,” said FINRA Chief Enforcement Officer and Executive Vice President Bill St. “At the same time, FINRA recognizes firms that proactively correct errors, identify and repay aggrieved investors, and provide substantial assistance to FINRA during its investigations.”
Settlements (and claims) made by FINRA to Edward Jones, OsaikAND Cambridge Investment Research they resemble each other. Under the arrangement, mutual fund issuers often offer clients a “right of reversion,” which allows investors to buy shares of the fund after previously selling shares of that fund or another fund in the same family without having to pay an up-front sales charge or to recover all or part of the deferred sales charge.
The benefit usually only applies for a certain period after the initial sale and may vary depending on the fund. According to FINRA, the benefit period generally ranges from 30 to 120 days after the fund is initially sold, but can be as long as two years.
For Edward Jones, the period in question ran from January 2015 to June 2020, while for Osaic, it was January 2017 and August 2022, and Cambridge from January 2015 to March 2022.
In the Edward Jones case, the firm did not oversee whether eligible clients received sales fee waivers and fee discounts on mutual funds through the funds' rights to reset rules. In Osaic's case, the firm failed to obtain “the information necessary to determine and evaluate the benefits of reinstatement.” In Cambridge's case, the firm “primarily relied on individual registry representatives to manually identify and apply resettlement discount rights.”
Under the agreements, Edward Jones clients paid $4,440,979 in excess sales fees, Osaic Wealth clients paid $3,096,490 and Cambridge clients paid $699,217; the firms agreed to pay the injured customers, including interest.
According to FINRA, each firm “demonstrated extraordinary cooperation” by reviewing its practices and procedures, hiring third-party consultants to locate harmed clients and planning to compensate eligible clients.
Osaic declined to comment and Cambridge Investment Research did not respond before publication, while a spokesman for Edward Jones said the firm was “pleased” to resolve the matter.
“We take this matter seriously and have improved our policies, procedures and practices,” they said. “Our top priority remains serving our customers and helping them achieve financially what's most important to them and their families.