An introducing broker ("IB") and a broker-dealer settled FINRA charges for share-class recommendations that resulted in their clients paying excess fees on their investments.
According to FINRA, the IB and broker-dealer failed to (i) enforce written supervisory procedures and (ii) supervise its representatives' share-class recommendations to clients. Specifically, FINRA stated that the clients participating in tax-advantaged state-sponsored securities plans ("529 plans") incurred excess fees as a result of recommendations that did not account for beneficiary age and the number of years until expected withdrawals.
To settle the charges, the IB and broker-dealer agreed to pay restitution amounts of at least $3,828,804, in connection with the sale of Class C units to customers of state-sponsored 529 plans. FINRA stated that the IB and broker-dealer resolved the matter without a monetary fine as a result of their cooperation, in addition to agreeing to (i) a censure and (ii) instituting corrective policies and procedures concerning 529 plans.
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