Ladenburgh Thalmann Financial Services subsidiary Investacorp, Inc. agreed to settle charges that it failed to apply front-end sales charge waivers to eligible retirement plan and charitable organization customers who sought to purchase Class A mutual fund shares, resulting in 465 customers being overcharged by more than $215,000 for mutual fund purchases made between 2009 and 2016; Investicorp agreed to pay $247,886 in restitution as part of its settlement.
AWC #2015047977401
According to the report, Investacorp failed to establish and maintain adequate supervisory systems to detect and ensure that eligible customers received applicable sales charge waivers for mutual fund purchases.
Investigators say this manifested when eligible retirement and charitable organization customers were either sold Class A shares and paid unnecessary front-end sales charges, or were alternately and unsuitably sold Class B and C shares, which often carry significantly higher distribution and service fees in lieu of the front-end sales charge. In some cases, these Class B and C shares additionally were subject to a contingent deferred sales charge (also known as a "back-end" sales charge).
The findings state that even though certain Class A mutual funds sold through Investacorp offered sales charge waivers and disclosed this fact in their prospectus documentation, the firm nonetheless failed to apply the waivers to mutual fund purchases, resulting in excessive fees or overpayment for unnecessary sales charges.
FINRA went on to conclude, "if an investor qualifies for a Class A sales charge waiver, there would be no reason for the investor to purchase any other class of shares that has a sales load and/or higher annual expenses."
Regulators have targeted firms for failing to apply sales charge discounts and waivers in the past. In 2016, FINRA fined Coburn & Meredith, Inc. $75,000 for failing to apply sales charge discounts, while in February 2017, FINRA ordered Purshe Kaplan Sterling Investments to pay $3.4 million in restitution for excessive sales charges, and sanctioned former Morgan Stanley broker Elaine Diones LaCerte for an unsuitable pattern of UIT trading resulting in unnecessary sales charges.
If you have invested with Investacorp or with any broker, financial adviser, or firm which has sold Class A mutual fund shares, but failed to apply sales charge waivers to which you were entitled, or has unsuitably recommended higher-expense Class B and C shares in order to avoid paying Class A sales charges that should have been waived in the first place, and such oversight has resulted in overpayment or excessive fees, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.