FINRA orders Merrill Lynch to pay $15.2m in restitution over mutual funds

Rick Steves

FINRA has ordered Merrill Lynch to pay more than $15.2 million in restitution and interest to thousands of customers who purchased Class C mutual fund shares when Class A shares were available at substantially lower costs.

As the regulator explained, mutual fund issuers offer different classes of mutual fund shares, including Class A, which are subject to a front-end sales charge, and Class C shares, which typically do not carry a front-end sales charge but have ongoing fees and expenses that are higher than those of Class A shares.

Customers usually can purchase Class A shares without a front-end sales charge if the purchase exceeds certain thresholds and if a customer qualifies to purchase Class A shares without a front-end sales charge, there would be no reason for the customer to purchase Class C shares with higher annual expenses.

Merrill Lynch, Pierce, Fenner & Smith, Inc. maintained an automated system designed to restrict a customer’s purchase of Class C shares when lower cost Class A shares were available.

The system, however, often failed to correctly identify and implement applicable purchase limits on Class C shares. As a result, thousands of Merrill Lynch customers purchased Class C shares, incurring fees and charges, when Class A shares were available at a substantially lower cost. This led FINRA to act.

FINRA applauds Merrill Lynch extraordinary cooperation

Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement, said: “FINRA member firms must have supervisory systems reasonably designed to ensure that customers are aware of, and receive, available discounts when purchasing mutual funds, and are not charged unnecessary fees and expenses. We want to remind and encourage firms to proactively detect, fix, and remediate these types of supervisory issues to realize the benefits of extraordinary cooperation when warranted.”

Merrill Lynch accepted and consented to the entry of FINRA’s findings without admitting or denying them, agreed to provide restitution to harmed costumers and agreed to convert certain customers’ existing Class C holdings to Class A shares, where appropriate.

The mutual fund issuer also voluntarily and proactively conducted an internal review, engaged an outside consultant to identify affected customers and calculate remediation, and established a remediation plan to repay customers and convert shares, where applicable.

FINRA did not impose a fine due to the firm’s extraordinary cooperation and substantial assistance with the investigation.

Read this next

Retail FX

Weekly Roundup: Funded Trader closure, Coinbase adds Apple Pay

Welcome to this week’s roundup, where we delve into the latest developments in the Forex, Fintech, and cryptocurrency markets. Stay ahead of the curve with our comprehensive overview of the week’s most impactful events and trends across these dynamic sectors.


Presale Rush: BlockDAG Outshines Furrever Token and DeeStream Presales with 20,000x ROI Potential, Raising Over $16.4M

Discover April 2024’s presale hits, as BlockDAG, Furrever Token, and DeeStream Presales battle it out. Which will explode in 2024?

Digital Assets

Shakeeb Ahmed gets three-year sentence for hacking Nirvana, Crema

A New York court has sentenced computer security engineer Shakeeb Ahmed to three years in prison for conducting flash loan attacks on decentralized cryptocurrency exchanges in 2022, marking the first-ever conviction for a breach involving smart contracts.

Digital Assets

TON Foundation teams up with HashKey on fiat access for Telegram Wallet

The TON Foundation, a collective of developers behind The Open Network (TON) blockchain, has entered into a strategic partnership with digital asset financial services firm HashKey Group.


BlockDAG aka Kaspa’s Toughest Competitor Releases DAGpaper, Lightes Up The Las Vegas Sphere Pulling Shiba Inu Investors & Amassing $16.4M in Presale

BlockDAG, emerging as a Kaspa competitor, unveils its DAGpaper, spotlighting the Las Vegas Sphere and captivating Shiba Inu investors with a $16.4M presale success.

Fundamental Analysis

Global FX Market Summary: USD, ECB, Gold, Oil  April 12 ,2024

A strong US economy, cautious Fed policy compared to Europe, and safe-haven demand are all fueling the surge of the US Dollar.

Digital Assets

Thai crypto exchange Bitkub eyes $3 billion valuation

Thailand’s largest cryptocurrency exchange Bitkub is gearing up for a public offering next year with a potential valuation of up to $3 billion, according to Bitkub Capital Group CEO Jirayut Srupsrisopa.

Technical Analysis

GBPUSD Technical Analysis Report 12 April, 2024

GBPUSD currency pair can be expected to all further toward the next support level 1.2400, target price for the completion of the active minor impulse wave.

Market News

Navigating Currency Trends: Extensive Analysis on EUR/USD Signal

Traders Union provides comprehensive daily analysis and signals for EUR/USD.