FINRA Sanctions Western International Securities, Pasadena, CA
According to FINRA’s September Disciplinary report, on July 16, 2019, the regulator reportedly sanctioned Western International Securities (CRD #39262, Pasadena, CA) with a censure and a $75,000 fine and required the firm to provide remediation to eligible customers who qualified for, but did not receive, the applicable mutual fund sales charge waivers.
As part of this settlement, the Western reportedly agrees to pay restitution to eligible customers, which is estimated to total $375,000 (i.e., the amount eligible customers were overcharged, inclusive of interest).
Without admitting or denying the findings, the Western reportedly consented to the sanctions and to the entry of findings that it purportedly disadvantaged certain retirement plan and charitable organization customers who were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge.
FINRA’s findings stated that these eligible customers allegedly were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. This resulted in eligible customers reportedly paying higher fees than they were actually required to pay. The findings also stated that the firm purportedly failed to reasonably supervise the application of sales charge waivers to eligible mutual fund sales.
Western International reportedly relied on its financial advisors to determine when sales charge waivers should be applied, but allegedly failed to maintain reasonable written policies or procedures to assist financial advisors in making this determination, according to FINRA.
In addition, the firm purportedly failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales charge waivers for eligible customers. Since the firm allegedly failed to adopt reasonable controls to detect instances in which they did not provide sales charge waivers to eligible customers, the firm reportedly estimates that eligible customers were overcharged by approximately $305,000 for mutual fund purchases made since January 1, 2011, according to FINRA.
For FINRA’s full findings see FINRA Case #2017056440501.
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