Cetera firms to pay $3.2M in refunds in FINRA mutual fund waiver sweep

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Cetera Financial Group will pay refunds of $3.2 million to retirement plan and charitable organization clients under the firm’s latest settlements with FINRA over sales fees on mutual funds.

Five of Cetera’s member firms this week followed its two others in agreements with FINRA to provide restitution for accounts hit with charges the regulator says were avoidable through waivers. The seven settlements amount to more than $5.7 million in refunds across nearly 3,000 client accounts.

Wells Fargo, Raymond James and LPL Financial agreed to pay clients back a combined $30 million in July 2015 after the regulator alleged the same violations at those firms. Five other firms issued restitution of $18 million months later, and FINRA unveiled its so-called mutual fund waiver sweep in May 2016.

Securities America last year paid out $1.5 million in a waiver settlement, and National Planning Holdings firms issued more than $2.5 million in such refunds in March. FINRA has sanctioned 35 different firms over the issue since 2015, according to a spokeswoman.

With sales waiver restitution nearing $80 million, regulators have made all aspects of share class selection a major area of emphasis. The SEC and FINRA want to ensure advisors have “recommended the cheapest share class,” says Cipperman Compliance Services founder Todd Cipperman. “They’ve been very keen on that.”

Cetera Advisors, Cetera Advisor Networks, Cetera Investment Services, Cetera Financial Specialists, First Allied Securities, Girard Securities and Summit Brokerage Serves saddled clients with unnecessary fees over the past eight years by not using the available waivers, according to FINRA. The regulator did not name the clients.

The overpayments assessed on retirement plans and charities included front-end sales charges on Class A shares and back-end sales charges, along with higher fees and expenses, on Class B and Class C shares, FINRA says.

Cetera “failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales charge waivers,” according to the firms’ letters of acceptance, waiver and consent.

Cetera Advisors and Cetera Advisor Networks had agreed to the terms in May, and the five other firms agreed to settlements this week. The firms pledged to provide refunds, including interest, to all affected clients and apply available retirement and charity waivers to all eligible accounts.

Cetera, whose firms represent the third-largest headcount among all independent broker-dealers with roughly 8,000 advisors, does not discuss regulatory matters, according to spokesman Joseph Kuo. He released a statement on the outcome of the seven FINRA cases, though.

“We identified and reported this matter to FINRA, and voluntarily elected to refund sales charges to eligible clients prior to concluding the agreement with FINRA,” Kuo said.

“We are moving forward with the payments to clients, and are pleased to conclude a matter that has also affected many other FINRA member firms.”

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