FINRA: Commonwealth Financial Network Improperly Overcharged Investors

Commonwealth Financial Network (CRD#: 8032) is a registered broker-dealer based in Waltham, Massachusetts. The company is licensed to operate in 53 U.S. states and territories. According to Brokercheck, this firm has 38 disclosures — including 22 regulatory events and15 FINRA arbitration proceedings.

On November 9th, 2018, the Financial Industry Regulatory Authority (FINRA) announced that Commonwealth Financial Network entered into a Letter of Acceptance, Waiver and Consent (AWC) to settle charges that it overcharged retirement plan and charitable organization customers on certain mutual fund purchases.

Commonwealth Financial Network Improperly Disadvantaged Certain Investors

The relevant time period in this case runs from July of 2009 to July of 2017. During that time, FINRA alleges that Commonwealth Financial Network disadvantaged some retirement plan and charitable organization customers when executing mutual fund purchases.

The customers were eligible to purchase Class A shares of certain mutual funds. However, they were sold Class B shares and Class C shares by some of Commonwealth’s financial advisors. This is an important distinction because the investors were eligible to purchase shares without a front-end sales charges. However, they were offered shares with a front-end sales charge.

This conduct is a violation of FINRA Rule 3110, which requires brokerage firms to put a proper supervisory system in place to, among many other things, identify and apply sales charge waivers when appropriate.

Without admitting or denying wrongdoing, Commonwealth Financial Network has agreed to pay $888,337 in financial restitution to affected customers. FINRA recognized that this brokerage firm has cooperated fully with the investigation and that it has conducted its own internal review to help remediate investors.

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