SI, an Asset International company, also finds that for May,
U.S. Equity funds (-$2 billion) experienced their first aggregate net outflows
since January, while International Equity ($16 billion) saw another month of
consistent net investment.
Inflow leading strategies among active U.S. equity managers
in April were Natural Resources ($1.8 billion), Income-Mixed ($1.3 billion) and
Real Estate ($1.1 billion). International Total Return ($1.8 billion) and
Emerging Market Equity ($1.8 billion) drove inflows to the International Equity
space.
Taxable bond fund flows ($21 billion) were led by the
Government Intermediate Maturity ($5.3 billion) and Corporate Bond General ($3
billion) objectives in May. Tax-free bond funds saw significant inflows of $4.1
billion in May, led by the Muni National High Yield ($1.6 billion) objective.
Money market funds collected $6.5 billion in May.
More
information about Strategic Insight (SI) is athttp://www.sionline.com.
Subscribers may view SI’s Monthly Fund Industry Review here.
The Financial Industry Regulatory Authority (FINRA)
fined Merrill Lynch $8 million for failing to waive mutual fund sales charges
for certain charities and retirement accounts.
The agency also ordered Merrill Lynch to pay $24.4 million
in restitution to affected customers, in addition to $64.8 million the firm has
already repaid to harmed investors.
Mutual funds offer several classes of shares, each with
different sales charges and fees, explains FINRA. Typically, Class A shares
have lower fees than Class B and C shares, but charge customers an initial
sales charge. Many mutual funds waive their upfront sales charges for
retirement accounts and some waive these charges for charities.
Most mutual funds available on Merrill Lynch’s retail
platform offered such waivers to retirement plan accounts and disclosed those
waivers in their prospectuses. However, FINRA finds that at various times since
at least January 2006, Merrill Lynch did not waive the sales charges for
affected customers when it offered Class A shares.
As
a result, approximately 41,000 small business retirement plans, and
approximately 6,800 charities and 403(b) retirement plan accounts available to
ministers and employees of public schools, either paid sales charges when
purchasing Class A shares, or purchased other share classes that unnecessarily
subjected them to higher ongoing fees and expenses. According to FINRA, Merrill
Lynch learned in 2006 that its small business retirement plan customers were
overpaying, but continued to sell them more costly shares and failed to report the
issue to FINRA for more than five years.
FINRA found that Merrill Lynch’s written supervisory
procedures provided little information or guidance about mutual fund sales
charge waivers. Even after the firm learned it was not providing sales charge
waivers to eligible accounts, Merrill Lynch relied on its financial advisers to
waive the charges, but failed to adequately supervise the sale of these
products or properly train or notify its advisers about lower-cost
alternatives.
In concluding this settlement, Merrill Lynch neither
admitted nor denied the charges, but consented to the entry of FINRA’s
findings. More information about the settlement can be downloaded here.
The Financial Industry Regulatory Authority is an
independent regulator for all securities firms doing business in the United
States. It is dedicated to investor protection and market integrity through
effective and efficient regulation and complementary compliance and
technology-based services.
Investors can obtain more information about, and the disciplinary
record of, any FINRA-registered broker or brokerage firm by using FINRA’s
BrokerCheck, which is available at no charge at http://www.finra.org/brokercheck or
800-289-9999.