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Cetera BDs to Pay $3.3m in Mutual Fund Overcharges

August 23, 2017

Five broker-dealers within Cetera Financial Group have settled with Finra to pay clients back $3.3 million in mutual fund fee waivers, InvestmentNews writes.

From July 2009 to last month, the broker-dealers allegedly failed to supervise the application of the waivers in accounts of eligible clients, including in retirement plans and at charitable institutions, according to the publication. Cetera Investment Services agreed to pay back $1.4 million and Cetera Financial Specialists will pay $572,000, InvestmentNews writes. First Allied will pay $877,000 and Summit Brokerage Services agreed to pay $357,000, while Girard Securities will pay $103,000, according to the publication. The amounts represent the overcharges plus interest, InvestmentNews writes.

The firms allegedly left it up to their advisors to determine when to apply waivers but failed to have any written policies or procedures to help advisors with the decision, Finra said. A spokesman for Cetera Financial Group tells InvestmentNews that the firm identified the issue, reported it to Finra and decided to reimburse the affected clients even before the settlement was reached.

In May Finra had signaled that it would go after mutual fund overcharges. At the time it requested documentation from about 20 broker-dealers on mutual fund waivers and reimbursements, a spokeswoman for the industry’s self-regulator told the publication at the time. The same month, another Cetera company, Cetera Advisor Networks, reached a settlement with Finra for overcharging eligible clients $1.7 million since 2009, InvestmentNews writes.


Separately, the SEC has charged a Los Angeles RIA with defrauding a professional athlete and his wife, according to the publication. Jeremy Drake, who at the time of the fraud was with HCR Wealth Advisors, allegedly told the client and his wife, whom the regulator does not name, that he was extending them a “VIP” annual advice fee of no more than 0.20% while in fact charging them 1%, InvestmentNews writes. During the three years that Drake kept up the ruse, the clients overpaid by $1.2 million in management fees, according to the SEC’s charge, with Drake making off with $900,000 in incentive-based pay. The regulator is seeking a permanent injunction, return of the overcharges, with interest, and penalties, InvestmentNews writes.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.
  • To read the InvestmentNews article cited in this story, click here.