Merrill Lynch was fined $15.2 Million ($13.4 Million plus interest) by Financial Industry Regulatory Authority (FINRA). It allegedly charged consumers exorbitant fees for mutual fund transactions. Merrill was not penalized for the infraction due to its “exceptional cooperation”.
Mutual fund issuers offer several classes of mutual fund shares, including Class A and C. Class A shares are subject to a front-end sale fee. Class C shares don’t. On the other hand, Class C shares have higher yearly expenses and are often subject to a deferred sale charge.
Many mutual fund issuers offer discounts for customers who purchase enough Class A shares. They also offer no sales tax if they meet certain volume limits.
Merrill Lynch’s automated system was created to prevent Class C share transactions when Class A shares were made available at NAV or at a discounted price. Although the automated system accurately calculated customer purchases and fund holdings. However, FINRA stated that the system applied a Class C share purchase limit that was incompatible with a fund’s Class C limit purchase limit or a threshold for when Class A stocks were available at net assets value. This resulted in thousands of clients buying Class C shares and paying fees and charges when Class A shares were more affordable.
According to FINRA, Merrill Lynch customers paid $13.4 million in additional fees and costs between January 15 and January 2021.
FINRA praised Merrill’s “extensive inquiry” into the firm’s systems related to Class C mutual funds sales following the discovery. It was hailed by FINRA for its “exceptional cooperation and significant help.” A substantial fee was also paid to an independent expert by the company to identify affected customers and to “promptly create” a remedy plan for them.
Merrill Lynch, a full-service brokerage company, offers sales, trading, research, and underwriting services through approximately 31,000 agents. In January 2009, Merrill Lynch was an indirect, wholly-owned subsidiary of Bank of America Corporation.
How to File a Financial Advisor Complaint
Filing a financial advisor complaint is a good way to get redress for problems you have with your financial advisor. However, you need to be careful when filing a complaint. If you file it without proper research, it is likely to be dismissed without a proper hearing. Here are some tips to file a complaint:
The first step in filing a complaint is to contact FINRA. FINRA is a separate regulatory body from the U.S. government. They regulate the financial industry and enforce federal securities and foreign exchange laws. If you feel your complaint has merit, you should contact the FINRA or your state securities regulator. An attorney will help you file the complaint, review it and protect you during the arbitration. Here are the steps involved.
If the complaints are resolved, you can also file them with the Securities and Exchange Commission, the government agency that regulates securities professionals. The SEC can investigate complaints against financial advisors and take action, or dismiss them without any action. However, you should first seek the advice of an SEC-approved financial advisor before filing a complaint. A financial adviser’s qualifications should also be investigated by the SEC. It should be able to prove that he or she is qualified to provide investment guidance.
A financial advisor’s record can tell you a lot about the quality of their services. Moreover, if you’ve had to deal with more than one financial advisor in the past, you may want to think twice about hiring them. In addition, you should know how they compensate themselves. Some charge hourly fees while others work on commission. Regardless of the way they make their money, a financial advisor’s past will remain on their record.
Contact us today if you believe your financial advisor did something wrong and we will give you a free consultation with one of our experienced investment lawyers.