FINRA has censured and slapped Citizens Securities with a $50,000 fine for failing to apply sales charge waivers to mutual fund purchases made by retirement plan and charitable organization customers, according to a settlement posted on the regulator's website.

FINRA claimed that customers who were eligible for Class A shares in certain mutual funds without a front-end sales charge were either not given the sales charge waiver or sold Class B or C shares with back-end sales charges and higher ongoing fees and expenses.

Source: Bloomberg
Source: Bloomberg

"These sales disadvantaged eligible customers by causing such customers to pay higher fees than they were actually required to pay," FINRA claimed in the settlement.

The oversight caused approximately 277 customer accounts to be overcharged almost $60,000 from January 2011 to May 2016, according to Citizens' estimates.

FINRA faulted Citizens for not having a system in place to supervise the application of sales charge waivers to eligible mutual fund sales. It also chided Citizens for not providing advisers with adequate training and written policies and procedures regarding the availability of the waivers.

In addition to the $50,000 fine, Citizens agreed to pay restitution to customers in the amount of $64,000.

In its settlement with FINRA, Citizens neither admitted nor denied the charges but consented to an entry of FINRA's findings.

“We are glad to have this matter resolved," said Lauren DiGeronimo, a spokeswoman for Citizens.

The sanction follows a $300,000 fine that FINRA levied against the firm in January for late disclosures of customer complaints and other reportable event on reps' Forms U4 and U5.

Register or login for access to this item and much more

All Bank Investment Consultant content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access