Just this month, UBS Financial Services, Inc. submitted a Letter of Acceptance, Waiver and Consent No. 2013038351701 (AWC) that detailed a $250,000 fine for failures in supervision regarding sales of mutual fund shares to investors. According to the AWC, for a four year period, from approximately 2009 to 2013, UBS failed to provide sales charge waivers to customers entitled to waivers through rights of reimbursement. The AWC detailed that this conduct created a violation of FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade).
Mutual fund class A shares generally require the investor to pay an upfront sales charge, except where the mutual fund waives the charge, such as when the mutual fund is purchased with a right of reimbursement. The AWC detailed that investors sometimes purchase class A shares with right of reimbursement when they reinvest proceeds from earlier redemptions of Class A shares in the same fund or fund family within a specific time period.
UBS’s submitted AWC detailed that the firm failed to provide approximately 2,700 customers with sales charges waivers, even though they were entitled to them, and that this failure caused the customers to pay approximately $277,636 in excess sales charges.
The AWC also included details of prior supervisory failures regarding mutual funds. First, the AWC detailed that that UBS Financial Services, Inc. was fined $250,000 because, from January 2002 through June 2004, the firm failed to maintain supervisory systems and procedures to make sure investors were able to purchase class A mutual fund shares without paying an initial sales charge through net asset value (NAV) Transfer Programs (FINRA AWC EAF0401300001).
The AWC more recently detailed that UBS paid a fine of $2,310,884 (and was ordered to pay a civil penalty in the same amount to the U.S. Securities and Exchange Commission in a related settlement) because, in 2001 and 2002, the firm failed to provide approximately $4.6 million in mutual fund breakpoint discounts to customers (FINRA AWC CAF040007).