FINRA Fines MA Investment Advisory Firm, Citizens Securities

According the Financial Industry Regulatory Authority, Citizens Securities, Inc. (CRD #39550, Dedham, Massachusetts) submitted an AWC in which the firm was reportedly censured, fined $50,000 and required to provide FINRA with a plan to remediate eligible customers who qualified for, but did not receive, the applicable mutual fund sales-charge waiver.

As part of this settlement, the firm reportedly agrees to pay restitution to eligible customers, which is estimated to total $64,023. This includes the amount eligible customers were overcharged, inclusive of interest. The firm will also ensure that retirement and charitable waivers are appropriately applied to all future transactions.

Without admitting or denying the findings, the firm purportedly consented to the sanctions and to the entry of findings that it disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge.

The findings also allegedly stated that some of the mutual funds available on the firm’s retail platform offered such waivers and disclosed those waivers in their prospectuses. Notwithstanding the availability of the waivers, the firm failed to apply the waivers to mutual fund purchases made by eligible customers and instead 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.

These sales allegedly disadvantaged eligible customers by causing those customers to pay higher fees than they were actually required to pay. The findings also purportedly stated that the firm failed to reasonably supervise the application of sales charge waivers to eligible mutual fund sales.

The firm allegedly relied on its financial advisors to determine the applicability of sales charge waivers, but apparently failed to maintain adequate written policies or procedures to assist financial advisors in making this determination. The firm failed to establish and maintain written procedures to identify applicable sales charge waivers in fund prospectuses for eligible customers. In addition, the firm also allegedly failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales charge waivers for eligible customers.

The firm also failed to adopt adequate controls to detect instances in which they did not provide sales charge waivers to eligible customers in connection with their mutual fund purchases.

For FINRA’s full findings see FINRA Case #2016049977401.

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This information which is publicly available on FINRA’s website has been provided by The White Law Group.

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