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FINRA Fines 5 Broker-Dealers For Failure To Deliver Mutual Fund Prospectuses

Recently, on December 31, 2012, the Financial Industry Regulatory Authority, Inc. (“FINRA”) fined five broker-dealers for failure to deliver mutual fund prospectuses to their customers from January 2009 through June 2011. The five firms are LPL Financial LLC (“LPL”), State Farm VP Management Corp. (“State Farm”), Deutsche Bank Securities Inc. (“Deutsche Bank”), Scottrade Inc. (“Scottrade”) and T. Rowe Price Investment Services Inc. (“T. Rowe”). Specifically, in a settlement agreement with the five firms, FINRA stated that LPL relied on its brokers to deliver mutual fund prospectuses to customers, however, had no supervisory procedure to determine whether or not the mutual fund prospectuses were ever delivered. Additionally, FINRA stated that State Farm also inadequately supervised its brokers or a third party service provider in delivering 154,129 mutual fund prospectuses. Moreover, FINRA stated that Scottrade failed to deliver 14,000 mutual fund prospectuses out of 300,000 transactions, Deutsche Bank failed to deliver 3,800 mutual fund prospectuses out of 71,000 transactions, and T. Rowe failed to deliver 2,500 mutual fund prospectuses out of 68,000 transactions. Although there were no findings as to liability since the fines resulted in a settlement agreement, hopefully the fines will help impose stricter supervisory systems and controls to ensure these firms comply with prospectus delivery rules and requirements. Lax & Neville LLP can effectively assist investors, on both a regional and national level, that may have suffered losses as a result of their broker dealer’s sales practice abuses. Please contact our team of securities fraud attorneys for a consultation at (212) 696-1999.

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