FINRA fined Quest Capital Strategies, Inc. of Lake Forest, California for a series of supervisory and compliance failures related to the firm's mutual fund share class operation. In its decision to censure and fine Quest Capital $25k, FINRA noted that several suitability and other testing methods designed to review and achieve compliance with industry laws and regulations were deficient and outdated, such as a lack of WSPs to monitor and review accounts to prevent charging customers twice in fees for the same transaction.
According to the investigation, Quest failed to have any written supervisory procedures (WSPs) to address who and how mutual fund share class comparisons, rights of accumulation and analyses would be conducted. Quest also purportedly failed to specify how it planned to supervise the aforementioned processes and a timeframe for such reviews.
For instance, FINRA found that Quest failed to have WSPs in place as to how the firm would prevent charging a customer both an investment advisory management fee and a broker-dealer transaction-based commission.
When FINRA accused Quest with failing to establish adequate supervisory systems for mutual fund transactions, the firm stated it had conducted a "suitability review." In turn, FINRA found that the firm failed to provide documentation of the existence of any such "suitability review" by compliance officers.
Investigators further concluded that no adequate suitability review could have been conducted since Quest representatives purportedly failed to complete an internal form for new customers who held mutual funds as investments at the firm, and that the form for certain existing customers was outdated.
The investigation states that because of these internal deficiencies, testing performed by an independent third-party designed to test and verify such compliance was itself deficient and inadequate.
If you have invested in mutual funds with Quest Capital Strategies or with any firm whose supervisory systems such as WSPs were inadequate or failed to prevent systematic double-charging of fees and commissions, and these excessive charges have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.