A brokerage firm in Austin, Texas, has been fined $225,000 by Finra for overcharging clients $1.6 million in mutual fund fees between 2009 and 2018, Finra said.
Kestra Investment Services LLC, a subsidiary of independent broker-dealer Kestra Financial, agreed to the fine and other penalties in a consent agreement with Finra, the regulatory organization said in a press release.
The fund overcharges impacted about 3,205 clients over the nine-year period; Kestra agreed as part of the agreement to repay the customers, with interest, for total compensation of about $1.9 million, according to Finra. The firm also consented to a censure.
The overcharges stemmed from the sale of Class A mutual funds, which typically include up-front sales charges that some fund companies waive for certain types of clients, such as retirement plans and charitable organizations, according to Finra.
The complaint was filed after Finra discovered that Kestra failed to apply such waivers to eligible clients, Finra said.
"Kestra failed to apply the waivers to mutual fund purchases made by eligible customers and instead sold them Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses," Finra said in the consent agreement.
Finra attributed the failure to a lack of written guidance by Kestra and the firm not properly training its advisors to apply the waiver. Kestra has agreed to correct both problems as part of the consent agreement, Finra said.
Kestra has about 1,874 registered representatives and 682 branch offices, Finra said.
Finra noted that Kestra, which has been a Finra member since 1997, was fined $475,000 in 2016 due to improper supervision and training in regards to its annuity sales.
Representatives of Kestra Investment Services could not be reached for comment at press time.