FINRA cited Questar Capital Corp for overcharging clients in failing to apply available sales charge waivers to eligible retirement accounts and charitable organizations, namely in transactions concerning Class A mutual funds effected from 2009 through 2016. In the end, FINRA and Questar agreed that the firm will pay $796,892 in restitution to clients who paid excessive sales charges on mutual fund shares.
Ordinarily, many mutual funds waive up-front sales charges associated with Class A shares for retirement plans and charitable organizations.
For example, FINRA in October 2015 ordered five firms—Edward Jones & Co, Stifel Nicolaus & Company, Janney Montgomery Scott, AXA Advisors, and Stephens Inc—to pay $18 million in restitution to customers who were overcharged due to the firms' failure to waive mutual fund sales charges for charity and retirement accounts. In the summer of 2015, FINRA ordered Wells Fargo Advisors, Raymond James, and LPL Financial to pay restitution for similarly failing to waive sales charges for eligible charity and retirement plan customers.
The present report states that although several Class A mutual fund shares sold by Questar similarly offered such sales charge waivers, and actually disclosed the waivers in their prospectuses, Questar nonetheless failed to identify and/or apply these waivers to eligible mutual fund purchases for retirement plans and charitable organizations, resulting in the aforementioned excessive sales charges on the order of nearly $800,000.
FINRA concluded that Questar failed to reasonably supervise the application of sales charge waivers to eligible mutual fund sales, and thus failed to apply sales charges to eligible Class A mutual fund purchases. The supervisory deficiencies included the firm's failure to adequately notify and train financial advisors regarding the availability of mutual fund sales charge waivers.
During the course of the investigation, FINRA acknowledged Questar's own efforts to discover the extent of excessive charges, crediting the firm's "extraordinary cooperation" in initiating an investigation and expanding its look back period to 2009.
The unfortunate subtext here is Questar's internal actions were indeed "extraordinary": most firms in the past have not cooperated to such an extent.
If you have invested with Questar Capital Corp, or with any FINRA-member firm, broker, or financial adviser whose failure to identify and apply available sales charge waivers for Class A mutual fund shares has 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.