Taking a cue from FINRA and its year-long assault on broker-dealers that overcharged their customers on mutual fund purchases, the SEC announced a settlement with Ameriprise Financial Services on charges that the broker-dealer recommended and sold higher-fee mutual fund shares to retail retirement account customers and had failed to provide sales charge waivers.

Recently, FINRA announced the latest in a string of fines and sanctions against broker-dealers that had for years been overcharging retirement plan and charitable organization customers on mutual fund share purchases. [See FINRA Mutual Fund Sweep Claims Sanctions Against 9 More Firms.]

Ameriprise agreed to pay a $230K fine, plus nearly $2 million in remediation and interest to eligible customers.

SEC FINDINGS.    From at least January 2010 through June 2015 (the “Relevant Period”), Ameriprise disadvantaged certain retirement plan customers (“Eligible Customers”) by failing to ascertain that they were eligible for a less expensive share class, and recommending and selling them more expensive share classes in certain open-end registered investment companies (“mutual funds”) when less expensive share classes were offered to these Eligible Customers by Ameriprise on its platform.

Ameriprise did so without disclosing that it would receive greater compensation from the Eligible Customers’ purchases of the more expensive share classes. Eligible Customers did not have sufficient information to understand that Ameriprise had a conflict of interest resulting from compensation it received for selling the more expensive share classes.

Specifically, Ameriprise:

• Recommended and sold these Eligible Customers Class A shares with an up-front sales charge or Class B or Class C shares with a back-end contingent deferred sales charge (“CDSC”) and higher ongoing fees and expenses, when these Eligible Customers were eligible to purchase load-waived Class A shares.

• Omitted material information concerning its compensation when it recommended the more expensive share classes to these Eligible Customers.

• After failing to ascertain the customers’ eligibility for load-waived A shares, did not disclose to Eligible Customers that the purchase of the more expensive share classes would negatively impact their overall return, in light of the different fee structures for the different fund share classes.

[Click here for further details:  SEC Complaint.]