FINRA Censures First Allied Securities for Mutual Fund Sales charge waivers

 According to the Financial Industry Regulatory Authority, First Allied Securities, Inc. (CRD #32444, San Diego, California) was issued and AWC on August 21, 2017. The firm was censured and required to provide FINRA with a remediation plan for eligible customers for mutual fund sales-charge waivers.

As part of this settlement, First Allied agreed to pay restitution to eligible customers, which is estimated to total approximately $876,915 (the amount eligible customers were overcharged, with interest).

The firm will reportedly also ensure that retirement and charitable waivers are appropriately applied to all future transactions. First Allied Securities allegedly 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 stated that these eligible customers were instead 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. Instead, according to FINRA, they reportedly sold them Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges. This resulted in  higher ongoing fees and expenses for the customers — more than they were actually required to pay.

Supervisory Issues

FINRA’s findings also stated that First Allied failed to establish and maintain a supervisory system with  procedures to ensure that customers who purchased mutual fund shares received the applicable sales-charge waivers.

First Allied allegedly relied on its financial advisors to determine the applicability of sales-charge waivers, but failed to maintain adequate written policies or procedures to assist financial advisors in making this determination. In addition, the firm reportedly failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales-charge waivers for eligible customers.

As a result of the firm’s failure to apply available sales-charge waivers, the firm estimates that eligible customers were overcharged by approximately $769,054 for mutual fund purchases made since July 1, 2009.

For FINRA’s full findings see FINRA Case #2016050259301.

Investigating Potential Claims

The White Law Group is investigating the liability that First Allied Securities 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 First Allied Securities?  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.