Financial Industry Regulatory Authority orders Securities America to pay USD 2 million restitution and USD 1 million fine over weak supervision of Class A mutual fund switches and short-term sales

The Financial Industry Regulatory Authority (FINRA) sanctioned Securities America, Inc., ordering USD 2 million in restitution and imposing a USD 1 million fine after finding the firm failed to reasonably supervise certain Class A mutual fund recommendations, resulting in customers paying unnecessary fees through recommendations that were potentially unsuitable or not in customers’ best interest. Between January 2018 and June 2024, Securities America effected approximately USD 3.8 billion in purchases of Class A mutual fund shares but did not implement supervisory controls, including written policies and procedures, reasonably designed to monitor compliance with FINRA Rule 2111 (Suitability) and Regulation Best Interest’s Care Obligation. FINRA found the firm’s system was not reasonably designed to detect fund-family switches and short-term sales of Class A shares, and that even when such activity was identified it was not reasonably reviewed to ensure representatives had considered fees and commissions. FINRA identified 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 customer’s best interest, leading customers to pay USD 2,019,040 in commissions and fees that will be returned. The matter originated from a FINRA cycle examination and was resolved through a settlement in which Securities America consented to FINRA’s findings without admitting or denying the charges.