INVESTOR DEFENSE LAW BLOG

Investors Overcharged for Mutual Funds by MassMutual, H.D. Vest & Principal Securities, FINRA Alleges

Posted on Feb 10th, 2017 to Common Misconduct, H.D. Vest, Investment Firms, Mass Mutual (MML Investor Services), Overcharging Accounts, Poor Supervision, Principal Securities, Robert W. Baird, Securities America

If you bought mutual funds from H.D. Vest or MassMutual’s brokerage arm, MML Investor Services, you may have been overcharged. The Financial Industry Regulatory Authority (FINRA) has been cracking down on investment firms that do not apply mutual fund sales charge waivers investors are entitled to receive, and MassMutual and H.D. Vest are just the latest firms to be caught overcharging investors.

This can add up to thousands of dollars per investor, and millions in ill-gotten profits for brokerages. Here’s a quick summary of the larger firms and amounts FINRA has recently ordered returned to investors:

1)      MassMutual’s MML Services: $2 million

2)      H.D. Vest: $250,000

3)      Merrill Lynch: $8 million

4)      Wells Fargo: $15 million

5)      Raymond James: $9 million

6)      LPL: $6 million

7)      Edward Jones: $14 million

8)      Stifel Nicolaus: $3 million

9)      Janney Montgomery Scott: $1 million

10)   Principal Securities: $1 million

11)   Securities America: $1.5 million

12)   Robert W. Baird: $2 million

Mutual funds charge fees and sales charge to investors purchasing them, but these fees can be reduced or waived in at least two instances. First, investment firms offer volume discounts at breakpoints that vary from fund to fund. Second, some firms and funds waive or reduce fees for charitable accounts and retirement accounts.

These fee waivers and reductions can make a huge difference in an investor’s portfolio—if they are applied.

According to settlement agreements between FINRA and these firms, they not only failed to apply sales charge waivers; they also failed to adequately supervise their advisors to catch this sort of misconduct. The decision was largely left in the hands of financial advisors who would receive smaller commission checks if these fee waivers were properly applied.

This is the sort of mistake that directly benefits financial advisors and brokerage firms at the expense of their investors; no wonder it took FINRA stepping in to get this problem fixed!

There is a lot of talk right now about the Department of Labor’s (DOL’s) proposed fiduciary rule, which would require financial advisors to put their clients’ interests first in retirement accounts. For many financial advisors, their legal duties are closer to those of a salesman, who needs only to sell his customers a product that is “suitable” for them, even if a better, cheaper product is also available. These widespread multimillion dollar charges—which never should have happened at all—are dispiriting evidence that plenty of firms cannot even meet the lower standard. No wonder firms don’t want to be held to a fiduciary standard!

If you have questions about investment losses, the securities litigation attorneys at Investor Defense Law LLP may be able to help, and offer free consultations. Investor Defense Law LLP is a law firm dedicated to helping investors in California, Georgia, and Washington State recover investment losses. We understand investment fraud and know how to sue investment advisors, brokerage firms, and financial advisors. To learn more, contact an investment fraud attorney at 800.487.4660.


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