FINRA has censured BB&T Investment Services for failing to apply mutual fund sales charge waivers to the accounts of retirement plan and charitable organization customers, according to the firm's settlement with FINRA.
The regulator chided BB&T for selling customers shares in mutual funds with front- or back-end sales charges when they were eligible for Class A shares that waived the upfront sales load. Specifically they were 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, according to FINRA.
"These sales disadvantaged eligible customers by causing such customers to pay higher fees than they were actually required to pay," FINRA said.
The firm's failure to identify and apply the available sales charge waivers occurred from at least July 2009 through August 2017, affecting some 865 accounts, according to the settlement. BB&T estimates that eligible customers were overcharged by approximately $332,000.
FINRA also faulted BB&T for neglecting to reasonably supervise the application of sales charge waivers, saying its financial advisors were not adequately notified and trained.
The regulator, however, applauded BB&T for self-reporting the issue to FINRA after its affiliate, BB&T Securities, determined that its customers had not received available sales charge waivers and reported the problem to FINRA.
"We are pleased this matter has been resolved and that FINRA recognized the “extraordinary cooperation” of BB&T Investment Services for proactively addressing the matter and quickly enhancing our policies and procedures," Brian Davis, a BB&T spokesman, said in a statement.
As part of the settlement, BB&T paid restitution to eligible customers, estimated at $373,000, the amount the customers were overcharged plus interest.
In addition, it agreed to a censure and provided FINRA with a written plan describing how it will determine whether customers ineligible for Class A shares without a front-end sales charge are eligible for alternative share classes without a front-end charge and with ongoing fees similar to those of the Class A share.
The firm agreed to the sanctions without admitting or denying FINRA's allegations.
BB&T joins at least one other bank that was sanctioned by FINRA this year for overcharging customers on mutual funds. Citizens Securities was fined $50,000 in March for the same lapses on mutual fund sales charge waivers as BB&T.
The SEC, too, has cracked down on mutual-fund fee offenses. In September, it slammed SunTrust with a $1.1 million penalty for putting clients into higher-fee mutual funds.
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