Voya Financial Advisors has agreed to a settlement after being charged by Finra with failing to provide mutual funds and charities with relevant sales charge discounts over a seven-year period.
Under the agreement, the firm, which is the broker-dealer of Voya Financial, has agreed to make restitution of $125,982 to retirement plans and charities that were not given the discounts from 2006 to 2016.
Finra also censured Voya Financial Advisors, a Des Moines, Iowa-based firm with 2,400 financial advisors in 1,210 branches nationwide.
A spokesman for Voya said they reported the issue to Finra after they discovered it. “Ensuring that our customers receive the appropriate products and services to help them meet their retirement needs is core to our focus as a company,” Voya spokesman Christopher Breslin told Financial Advisor in an email. “Following our initiation of a review of the sales of certain classes of mutual funds, Voya Financial Advisors, Voya’s retail firm, reported the matter to FINRA and worked with them to ensure that customers were made whole for additional fees that they were charged. We have revised our procedures to address this issue going forward and avoid a recurrence of it. We are pleased to have resolved this issue and to have provided full reimbursement to our customers.”
Despite the fact that many of the mutual funds available on Voya’s retail platform offered sales-charge waivers to retirement plans and discounts and disclosed those waivers in their prospectuses, Voya failed to provide the discount to relevant customers, Finra found.
“Notwithstanding the availability of the waivers, Voya failed to apply the waivers to mutual fund purchases ... 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," the settlement stated. "These sales disadvantaged eligible customers by causing such customers to pay higher fees than they were actually required to pay."
Instead of monitoring and applying the discounts as a firm, Voya relied on its financial advisors to determine the applicability of sales charge waivers, Finra said, adding that the firm “failed to train advisors or maintain adequate written policies or procedures to assist financial advisors in making this determination.”
Voya failed to adopt adequate controls to detect instances in which the firm did not provide sales charge waivers to eligible customers in connection with their mutual fund purchases, according to the settlement.
“Voya failed to reasonably supervise and apply available mutual fund sales charge waivers to eligible mutual fund sales,” the regulator said.
This is the second time Voya has been charged by Finra for failing to provide available sales-charge discounts to clients. In 2015, Finra imposed a censure, fine of $325,000 and restitution of $41,853.20 on Voya for failing to apply discounts to non-traded REITs, business-development companies and UlTs. Voya was also charged for failing to establish and maintain adequate supervisory systems and procedures as part of that settlement.
The new settlement is the result of an internal review that Voya began in 2015 to determine whether the firm provided available sales charge waivers to eligible customers. Based on the review, Voya self-reported its findings to Finra on May 26, 2016.