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FINRA Fines Wells Fargo, Raymond James And LPL Financial Over $30 Million For Overcharging Clients In Mutual Fund Sales

On July 6, 2015, the Financial Industry Regulatory Authority (“FINRA”) announced that Wells Fargo Advisors, LLC, Wells Fargo Advisors Financial Network, LLC (collectively, “Wells Fargo”), Raymond James & Associates, Inc., Raymond James Financial Services, Inc. (collectively, “Raymond James”), and LPL Financial LLC (“LPL”) must pay over $30 million to investors who were overcharged on mutual fund sales for certain accounts.  Wells Fargo, Raymond James and LPL were ordered to compensate these affected investors with an estimated $15 million, $8.7 million and $6.3 million, respectively, in restitution and interest.

According to the FINRA Letters of Acceptance, Waiver and Consent, Wells Fargo, Raymond James and LPL offer sales charge waivers on certain mutual fund sales.  Mutual funds have different classes of shares, which vary in their structure, sales charges and fees.  Class A shares generally have significantly lower ongoing fees than Class B or Class C shares; however, Class A shares typically require an initial sales charge at the time of purchase.  Although many mutual funds waive the upfront charges on Class A shares for certain retirement and charity accounts, Wells Fargo, Raymond James and LPL did not waive the sales charges for the affected customers.  According to the FINRA Letters of Acceptance, Waiver and Consent, Wells Fargo, Raymond James and LPL failed to properly train or provide necessary information to their financial advisors regarding waiver of these fees and charges.  As a result, according to FINRA, more than 50,200 retirement and charity accounts paid unnecessary sales charges on their Class A share purchases or bought other mutual fund share classes that incurred higher continuous fees and expenses.

Brad Bennett, Executive Vice President and Chief of Enforcement at FINRA, said, “In this case, FINRA is ordering meaningful restitution to adversely affected investors consistent with our commitment to ensure that mutual fund investors get the full benefit of available fee and expense reductions. 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.”

Wells Fargo, Raymond James and LPL, neither admitting nor denying the charges, accepted FINRA’s findings.

The attorneys at Lax & Neville LLP have extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses. If you have suffered damages stemming from the purchase of mutual funds, contact Lax & Neville LLP today at (212) 696-1999 and schedule a consultation.

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