FINRA Sanctions Park Avenue Securities, New York, NY
According to FINRA’s September Disciplinary report, on July 13, 2019, the regulator reportedly sanctioned Park Avenue Securities (CRD #46173, New York, NY) with a censure and a requirement 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 firm agrees to pay restitution to eligible customers, which is estimated to total $640,552 (i.e., the amount eligible customers were overcharged, inclusive of interest).
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it 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.
The findings stated that these eligible customers 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.
Eligible customers were reportedly disadvantaged by paying higher fees than they were actually required to pay. The firm failed to reasonably supervise the application of sales charge waivers to eligible mutual fund sales, according to the findings. The firm apparently relied on its financial advisors to determine the applicability of sales charge waivers, but failed to maintain adequate WSPs to assist financial advisors in making this determination.
Further, Park Avenue Securities failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales charge waivers for eligible customers. The firm reportedly failed to adopt adequate controls to detect instances in which they did not provide sales charge waivers to eligible customers in connection with their mutual fund purchases, according to the findings.
As a result, it estimates that eligible customers were overcharged by approximately $560,170 for mutual fund purchases made since January 1, 2011.
For FINRA’s full findings, see FINRA Case #2016049977201
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