FINRA Fines Osaic Broker/Dealer $1M Over Mutual Fund Supervision

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Securities America, an Omaha, Neb.-based broker/dealer that was consolidated into Osaic last year, will pay $3 million in restitution and fines to settle Financial Industry Regulatory Authority allegations that it failed to supervise mutual fund recommendations. 

In a letter of acceptance, waiver and consent detailing the settlement, Securities America did not admit nor deny the findings, but agreed to pay a $1 million fine and $2 million in restitution to its customers. 

"We take regulatory compliance seriously and have taken measures to ensure our policies, training and supervisory procedures continue to be designed to protect clients and prevent further issues,” an Osaic spokesperson said in a statement. “We remain committed to upholding the highest standards of integrity and acting in the best interest of clients."

Securities America was rolled into Osaic in June 2024. That was part of a larger effort by the broker/dealer to merge its multi-brand network into a single entity with a new name. 

FINRA claims that between January 2018 and June 2024, the broker/dealer did not have the written policies and procedures in place to supervise advisor recommendations of Class A mutual fund shares. 

Specifically, Securities America was not equipped to detect switches and short-term sales of Class A mutual funds. That resulted in more than 1,000 Class A mutual fund switches and more than 2,000 short-term sales that were potentially unsuitable or not in the client’s best interest. These customers paid more than $2 million in commissions and fees for these trades.  

Class A mutual fund shares typically collect a front-end sales charge, which is typically waived when switching to a new fund within the same family. In this case, FINRA claims the broker/dealer’s reps were recommending clients switch from one fund family to another, triggering a new front-end sales charge on Class A shares. 

The firm was also recommending that clients sell Class A shares shortly after buying, which creates a risk that a customer has paid an upfront fee without holding them long enough to benefit from it.

“When firms fail to supervise mutual fund recommendations, investors pay the price through unnecessary fees and charges,” said Bill St. Louis, executive vice president and head of enforcement at FINRA. “This $2 million in restitution will make affected customers whole, but prevention should always be the priority.”