Merrill Lynch has settled with the Financial Industry Regulatory Authority over findings it overcharged clients in mutual fund transactions. The firm has agreed to pay $7.2 million in restitution to clients who were overcharged.
According to FINRA, Merrill failed to have proper supervisory systems and procedures in place so that clients received sales charge waivers and fee rebates. The violations affected more than 13,000 Merrill Lynch accounts, the regulator said.
Mutual fund customers often have a “right of reinstatement,” which means they can purchase shares of a fund after selling shares of that fund or another in the same fund family with no front-end sales charges or to recoup all or part of a contingent deferred sales charge.
But, from April 2011 to April 2017, the firm’s alerts were not properly identifying rebates available through rights of reinstatement.
“Instead, the firm relied on its registered representatives to manually identify and apply such waivers and rebates, an unreasonably designed system given the number of customers involved, the complexity of determining which customers were due sales charge waivers or fee rebates, and difficulty in calculating the amount of the waiver and rebate,” FINRA said.
Merrill neither admitted nor denied the charges.
