FINRA compiled a list in 2009 of the 25 firms fined over $2.1 million combined for failures related to their completion of FINRA’s firm self-assessment in mutual fund breakpoint discount compliance.  This information was listed on FINRA’s website.

The breakpoint discounts are volume discounts applicable to front-end sales charges (front-end loads) on Class A mutual fund shares. The self-assessment followed findings by NASD, the NYSE and the Securities and Exchange Commission that nearly one in three mutual fund transactions that appeared eligible for a breakpoint discount did not receive one.

The names of the firms that were charged and fines assessed are:

J.J.B. Hilliard, W.L. Lyons Inc.                  $500,000

New England Securities                               $500,000

SunAmerica Securities, Inc.                        $300,000

Multi-Financial Securities Corporation    $150,000

H. Beck, Inc.                                                   $140,000

SWS Financial Services                                 $70,000

Leonard & Company                                       $60,000

Securities America, Inc.                                 $55,000

SIGMA Financial Corporation                     $50,000

Intersecurities, Inc.                                        $50,000

Fox & Company Investments Inc.               $45,000

Chase Investment Services Corp.               $32,500

vFinance Investments, Inc.                         $27,500

Investors Capital Corp.                                 $25,000

ProEquities, Inc.                                            $25,000

National Securities Corporation                $25,000

Gary Goldberg & Co., Inc                            $19,500

FSC Securities Corporation                        $15,000

Lincoln Investment Planning, Inc.           $15,000

Spelman & Co.                                              $10,000

Stephen L. Falk & Associates, Inc.             $7,500

First Midwest Securities, Inc.                     $7,000

GunnAllen Financial, Inc.                           $6,000

Advantage Capital Corporation                 $5,000

Financial West Group                                 $5,000

All 25 firms settled these matters without admitting or denying the findings, but consented to the entry of FINRA’s findings.

This ends the information from FINRA’s website.

Soreide Law Group, PLLC,  represents investors nationwide before the Financial Industry Regulatory Authority (FINRA). For a free consultation on how to potentially recover your financial losses call: 888-760-6552.

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WASHINGTON — It was announced today that the Financial Industry Regulatory Authority (FINRA) has fined Merrill Lynch $500,000 for failing to provide sales charge discounts to customers on eligible purchases of Unit Investment Trusts (UITs). FINRA also found that Merrill Lynch failed to have an adequate supervisory system in place to ensure customers received appropriate UIT discounts. The firm also agreed to provide remediation of more than $2 million to affected customers.

 ”Firms have been on notice since at least 2004 that they must develop and implement procedures to ensure customers receive appropriate sales charge discounts for UIT investments,” said James S. Shorris, FINRA Executive Vice President and Acting Chief of Enforcement. “In this case, it was critical for the firm to ensure that its brokers were diligent in providing sales charge discounts to which customers were entitled. This failure resulted in increased investment costs to Merrill’s customers.”

 A UIT is a type of investment company that offers redeemable units, of a generally fixed portfolio of securities, that terminate on a specific date. UIT sponsors generally offer sales charge discounts to investors, known as “breakpoint discounts” and “rollover and exchange discounts.”

A breakpoint discount is a reduced sales charge based on the dollar amount of the purchase – the higher the amount the greater the discount. Breakpoints generally function as a sliding reduction in the sales charge percentage available for purchases, usually beginning at $25,000 or $50,000 (or the corresponding number of units).

 A rollover or exchange discount is a reduced sales charge that is offered to investors who use the termination or redemption proceeds from one UIT to purchase another UIT.

 It was noted that on March 31, 2004, FINRA issued a Regulatory Notice to firms titled, Unit Investment Trust Sales. The Notice reminds broker-dealers that they should develop and implement procedures to ensure customers receive appropriate sales charge discounts for UITs.

Also, prior to May 2008, however, Merrill Lynch’s written supervisory procedures had little to no information or guidance regarding UIT sales charge discounts. Even after the firm established procedures addressing UIT sales charge discounts, the procedures were inaccurate and conflicting.

 Merrill Lynch also approved for distribution, and for use in client presentations, inaccurate and misleading UIT sales literature. The presentation discussed sales charge discounts, but led clients to believe that they were only entitled to a discount if they used UIT proceeds to purchase a new UIT offered by the same sponsor.

Merrill Lynch’s procedures lacked substantive guidelines, instructions, policies or steps for brokers or their supervisors to follow to determine if a customer’s UIT purchase qualified for and received a sales charge discount. As a result of its defective procedures, between October 2006 and June 2008, the firm failed to appropriately apply discounts on rollover and breakpoint purchases resulting in customers being overcharged on their UIT purchases.

 As part of the settlement, Merrill Lynch is providing restitution to all customers who were overcharged when purchasing UITs through the firm, from January 2006 to the present. Merrill Lynch settled this matter without admitting or denying the allegations, but consented to the entry of FINRA’s findings.

This information was obtained from FINRA’s website.

If you feel you have become a victim of the alleged overpricing of Merrill Lynch’s UITs, call a FINRA Securities arbitration lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA and the NFA.

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