The firm is accused of disadvantaging certain retirement plan and charitable organization brokerage customers by failing to recognize and act on the fact that they were eligible for less expensive share classes.
A settlement secured by Massachusetts financial market regulators from Janny Montgomery Scott underscores the importance of monitoring the share class recommendations being made to clients.
The SEC says the firm disadvantaged certain retirement plan customers by failing to provide them with less expensive share classes for which they were eligible.
According to the SEC, Morgan Stanley Smith Barney’s share class calculator had two operating errors that caused it not to provide the most beneficial share class to eligible customers; the firm was also accused of not consistently providing this benefit to certain eligible clients.
In censuring the firm, FINRA highlights the important fact that Voya demonstrated “extraordinary cooperation” and had initiated its own investigation and correction program prior to involvement by regulators.
FINRA is encouraging firms to undertake a qualitative review of their supervisory practices ranging back to 2013—not a full quantitative analysis of individual 529 plan transactions or recommendations.
Attorneys warn the “other shoe has dropped” in the SEC’s special Share Class Disclosure Initiative—and RIAs that did not self-report potential 12b-1 fee disclosure violations are now being investigated.