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Rating:For $13.75MM, a Bank Settles Involving Mutual Funds and a Now-Sold Biz Not Rated 0.0 Email Routing List Email & Route  Print Print
Tuesday, December 29, 2015

For $13.75MM, a Bank Settles Involving Mutual Funds and a Now-Sold Biz

Reported by Neil Anderson, Managing Editor

A multinational banking giant just settled accusations over its mutual fund sales and supervisory practices ... shortly after selling the unit in question..

Today Brad Bennett, executive vice president and chief of enforcement for Finra, unveiled a $13.75-million settlement with Barclays Capital. The independent regulator of broker-dealers and financial advisors accuses the U.S. arm Barclays' wealth and investment management, Americas business of failing to adequately supervise mutual fund switches and mutual fund breakpoint eligibility for retail brokerage customers. As such, by Finra's count more than 6,100 unsuitable mutual fund switches fell through the cracks between January 2010 and June 2015.

J. Bradley Bennett
Executive Vice President, Enforcement
A spokesman for Barclays declined to comment on the settlement.

Barclays' settlement also comes less than a month after Stifel closed on its June deal to buy the U.S. arm of Barclays' wealth and investment management, Americas business, the very unit under fire from Finra. MFWire could not immediately reach a Stifel spokesperson for comment on Barclays' Finra settlement.

As in most (though not all) such settlements, per Finra's statement, "Barclays neither admitted nor denied the charges, but consented to the entry of FINRA's findings."

The price tag of the settlement is more than $13.75 million, including more than $10 million in restitution and $3.75 million in fines. Finra estimates that the 6,100-plus unsuitable mutual fund switches translated into about $8.63 million in customer harm. In a single six-month period, Finra identified 39 percent of Barclays' mutual fund transactions as unsuitable and found 98 transactions involving A shares where investors missed breakpoints they were eligible for.

"The proper supervision of mutual fund switching and breakpoint discounts is essential to the protection of retail mutual fund investors, and this case highlights FINRA's commitment to ensuring that firms meet these obligations," Bennett states.

Two years ago J.P. Turner settled with the Finra over "excessive mutual fund switches," as well as use of leveraged and inverse ETFs. And in May of this year Finra fined LPL over accusations of "broad supervisory failures" over non-traditional ETFs and other products.

The Barclays settlement also comes after 11 B-Ds in the last year and a half have settled with Finra over accusations of failing to waive A shares loads for eligible charities and retirement plans. The first settlement, with Merrill, dates back to June 2014 and totaled $97.2 million. A second round, in July 2015, totaled more than $30 million and involved LPL, two sides of Raymond James, and two sides of Wells Fargo. And the third round, in October 2015, totaled more than $18 million and involved AXA, Edward Jones, Janney Montgomery Scott, Stephens Inc., and Stifel Nicolaus. The Merrill settlement last year included both fines and restitution, while the subsequent settlements this year were all restitution-only, no fines.  

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