Janney Montgomery Scott Sanctioned for Supervisory Failures with Mutual Fund Charges
According to the Massachusetts Securities Division, Janney Montgomery Scott is facing an administrative complaint for alleged failures in supervising its former broker’s sales of mutual funds.
The firm allegedly failed to supervise a registered representative from short-term trading of class A mutual fund shares from 2012 to 2017, according to a complaint filed by the office of the Secretary of the Commonwealth William Galvin.
Mutual funds in this share class are designed to be held for at least five years, but the representative allegedly traded them in some cases after just a few months, according to the complaint.
Due to the higher front-load fees and lower annual expenses, these mutual funds typically yield higher commissions to those selling them.
The complaint accuses the advisor of making close to $200,000 in “unnecessary commissions” during the period in question, according to reports.
Although a supervisor told the representative that mutual funds with lower front-loaded fees would be better for the clients, he purportedly continued buying the class A shares, according to the complaint.
The firm did not take action against the advisor, according to the complaint.
The complaint seeks a fine, censure and restitution, as well as an order that would require Janney to perform a review of all of the representative’s accounts and hire an independent compliance consultant to assess its policies and procedures on short-term trading of class A shares, according to reports.
Mutual Fund Over-charges
This complaint follows several actions taken by other regulators related to alleged violations in mutual fund sales.
The SEC settled with 79 firms, returning more than $125 million to clients in March after they self-reported selling higher-priced mutual funds to some of their clients than what was available to them.
The regulator offered an amnesty last year to broker-dealers that self-reported fee violations, and has reportedly been seeking alleged violators since the amnesty came to a close last June, according to reports.
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