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Written by 2:48 pm Blog, Current Investigations

FINRA Censures Cetera Investment Services for Overcharges

Cetera Investment Services

Cetera Investment Services will pay remediation to customers over mutual fund sales-charge waivers.

According to the Financial Industry Regulatory Authority, Cetera Investment Services LLC (CRD #15340, St. Cloud, Minnesota) was issued an AWC on August 21, 2017. The firm was censured and required to provide FINRA with a remediation plan to remediate eligible customers who qualified for, but did not receive, an applicable mutual fund sales-charge waiver.

Cetera agreed to pay restitution to eligible customers, which is estimated to total approximately $1,391,325 (the amount eligible customers were overcharged, inclusive of interest), according to the settlement.

The firm will also ensure that retirement and charitable waivers are appropriately applied to all future transactions. Cetera allegedly disadvantaged certain retirement plan and charitable organization customers who were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge.

FINRA stated that these eligible customers were allegdly sold Class A shares with a frontend sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses.

Many mutual funds waive the up-front sales charges associated with Class A shares for certain retirement plans and/or charitable organizations. Some of the mutual funds available on the firm’s retail platform offered such waivers and disclosed those waivers in their prospectuses.

The firm reportedly 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.

Cetera’s customers allegedy paid higher fees than they were actually required to pay, according to the settlement.

Supervisory Failures

The findings also stated that the firm allegedly failed to establish and maintain a supervisory system. Cetera purportedly relied on its financial advisors to determine the applicability of sales-charge waivers, but reportedly failed to maintain adequate written policies or procedures to assist financial advisors.

Additionally, the firm reportedly failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales-charge waivers for eligible customers.

The firm also allegedly 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.

As a result of the firm’s failure to apply available sales-charge waivers, the firm estimates that eligible customers were allegedly overcharged by approximately $1,220,192 for mutual fund purchases made since July 1, 2009.

For FINRA’s full findings see FINRA Case #2016050259201.

Investigating Potential Claims

The White Law Group is investigating the liability that Cetera Investment Services LLC may have for losses sustained by their clients.  Brokerage firms are required to adequately supervise their agents to ensure they are complying with FINRA rules. If it is determined that the broker dealer failed to supervise their agents, they can be held responsible for losses in a FINRA arbitration claim.

Are you concerned about your investment losses with Cetera Investment Services LLC?  The attorneys at The White Law Group may be able to help you. For a free consultation with a securities attorney, please call (888) 637-5510.

The foregoing information, which is all publicly available on FINRA’s website, is being provided by The White Law Group. The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.

For more information on The White Law Group, please visit www.whitesecuritieslaw.com.

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