Amerprise Financial Services, Inc. (CRD #6363, Minneapolis, Minnesota) submitted as Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $525,000.00.
Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it was required to provide each of its customers who purchased a mutual fund with a prospectus for that fund no later than three business days after the transaction. The findings stated that the firm contracted with third-party service providers for delivery of mutual fund prospectuses. On a daily basis, the firm provided the service providers with electronic information regarding mutual fund transactions requiring delivery of a prospectus to its customers, but the firm did not have any systems or procedures requiring daily or weekly review of the providers’ performance. The firm’s procedures did require monthly review of a sample of transactions, but did not specifically describe what the reviewer was required to look for or what actions the reviewer was required to take in the event that prospectus delivery deficiencies were identified. The number of transactions included in the reviewed sample was likely too small to provide an accurate assessment of the service providers’ performance. The findings also stated that the primary cause of the late deliveries was the failure of certain mutual fund companies to maintain adequate supplies of paper copies of prospectuses. As a result, for many purchases from these fund companies, the service providers could not obtain a prospectus to provide to the customer on time. The findings also included that the firm did not take actions to ensure that all of its customers were receiving prospectuses on time. For instance, the primary service provider offered a print-on-demand (POD) service to its clients, and the POD service allowed the service provider to obtain an electronic copy of the prospectus from the fund company, and then to print copies of the prospectus to send to the firm’s customers. The firm did not utilize this service or implement any alternative system for delivering prospectuses when fund companies were out of paper copies throughout the first 26 months of the review period. Because of the firm’s failure to deliver prospectuses on time to a significant number of customers who purchased mutual funds, these customers were not provided with important disclosures about these products by settlement date. The firm did begin utilizing POD later on, which then allowed its service provider to electronically obtain the prospectuses to send to customers as necessary. FINRA found that the firm executed more than 15,000,000 mutual fund purchase transactions that required it to deliver a mutual fund prospectus, or a summary prospectus, to the purchasing customer. As such, the firm was required to establish, maintain and implement a supervisory system and WSPs reasonably designed to monitor and ensure the timely delivery of mutual fund prospectuses. The firm’s WSPs did not require an adequate review of the service providers’ performance of their prospectus delivery obligations. Instead, the firm’s system for supervising the timely delivery of mutual fund prospectuses involved substantial reliance on the service providers.
This information which is publicly available on FINRA’s website has been provided by The White Law Group, LLC.
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