Wall Street Regulator Tags Bank of America with $7.2 Million Fine

The Financial Industry Regulatory Authority (FINRA) slapped Bank of America with $7.23 million in restitution and interest for failing to waive mutual fund sales charges for certain accounts.

The US investment bank agreed to pay the fine to resolve allegations that it excessively charged over 13,000 account owners in unnecessary sales fees from April 2011 to April 2017. Bank of America neither admitted nor denied wrongdoing under the Settlement Settlement Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Read this Term.

Most of the mutual funds on Merrill Lynch’s retail platform waive certain sales charge or pay fee rebates for eligible investors. But the firm failed to make sure its advisers were properly applying those waivers. Instead, representatives were manually identifying and applying such waivers and rebates in a process the Wall Street regulator described as “an unreasonably designed system” given the number of customers involved, the complexity of determining due customers, as well as difficulty in calculating the amount of the waiver and rebate.

“Firm alerts were designed to capture only recently executed mutual fund transactions while, in fact, fee waivers were available in connection with some fund purchases for up to a year after initial sales,” the Finra said.

The Wall Street regulator claims reporting issues like these make it harder to detect other wrongdoing and can create false red flags, which the agency then has to chase down.

It is not the first time the firm has been fined for overbilling. Bank of America’s (BAC) Merrill Lynch has previously faced similar allegations of invoicing errors, which occurred from 2006 to 2011 and got the company into trouble with regulators. In 2014, the wirehouse agreed to pay $8 million in fines and also reimburse $24.4 million to its affected customers while addressing a long-term problem of controlling fees that erode investor returns.

However, the financial services giant claimed it self-identified the problem and that the majority of customers’ accounts have been adjusted and fully refunded, and the firm has otherwise taken responsibility to resolve any remaining discrepancies. Merrill has previously repaid $64.8 million as part of the settlement and the total restitution was $97.2 million for its harmed investors.