FINRA orders Merrill to pay $7.2M over unnecessary sales charges
FINRA ordered Merrill Lynch to pay more than $7.2 million to customers over what it said were unnecessary sales charges and excess fees in connection with mutual fund transactions.
It’s the regulator’s largest restitution order of this year, though a Merrill Lynch spokesperson notes the company reimbursed clients more than a year ago.
The affected clients held more than 13,000 accounts at the brokerage, according to the regulator.
According to FINRA, from 2011 to 2017 Merrill Lynch lacked supervisory systems and procedures reasonably designed to ensure that clients received available sales charge waivers and fee rebates.
Instead, the firm relied on registered representatives to manually identify and apply waivers and rebates — “an unreasonably designed system given the number of customers involved,” according to FINRA.
"The firm's supervisory failures led to customers not receiving millions of dollars in sales charge and fee waivers on mutual fund purchases," Jessica Hopper, head of FINRA's department of enforcement, said in a statement.
In settling the matter, Merrill Lynch neither admitted nor denied the charges, but consented to the entry of FINRA's findings, according to the regulator.
“We enhanced our procedures in 2017 to ensure clients always receive the appropriate fee waivers and rebates related to mutual fund purchases,” a spokesman for Merrill Lynch said in a statement. “We fully reimbursed affected clients a year ago.”
FINRA recognized Merrill Lynch's “extraordinary cooperation” in examining the matter, noting the firm’s prompt reimbursement of affected clients and the substantial assistance it provided to the regulator.