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Regulatory Sanctions

Merrill Broker Sits Out a Year for Selling Loaded Mutual Funds

May 23, 2017

By Howard Haykin


In this day and age of ‘no-load’ mutual funds, FINRA still manages to mete out some heavy sanctions to brokers and their broker-dealers who inappropriately sell loaded fund shares to customers.


Jarred Lawson, a registered rep agreed to a $10K fine and a 1-year suspension to settle FINRA charges that he made negligent misrepresentations or omissions regarding the sale of mutual funds during telephone conversations with customers.


BACKGROUND.   Lawson, who resides in Jacksonville, FL, entered the securities industry in August 2012, as a GSR. From that point in time until 1/20/16, he has been associated with Merrill Lynch, Pierce, Fenner & Smith. Merrill U5’d Lawson based on the violations noted in this case. He had no prior disciplinary history.


FINRA FINDINGS.    From September 2015 through December 2015, Lawson made negligent misrepresentations or omissions pertaining to the sale of primarily Class A and C mutual funds during telephone conversations with 10 customers. Specifically, Lawson failed to discuss all share classes, fees associated with Class A and C shares, and breakpoint fees. In addition, Lawson made negligent misrepresentations regarding the fees associated with a managed account


FINRA further notes that Lawson made inaccurate entries in Merrill’s internal system.  Among other things, …

  • In 9 instances, Lawson misstated that he had discussed all share classes and the fees associated with the share classes, when he had not.
  • In 7 instances, Lawson misrepresented the fees associated with a managed account.
  • These inconsistencies caused Merrill’s books and records to be inaccurate.


FINANCIALISH TAKE-AWAYS.    It’s unfortunate that FINRA doesn’t explain how Lawson’s violative telephone conversations were discovered. Was it Merrill Lynch or FINRA examiners? Instead, the regulator seems more intent on telling member firms and their associated persons about, yet, another broker who sold mutual fund shares with front-end loads to unsuspecting customers.


How about letting FINRA members - the broker-dealers – understand what steps they can take to prevent such actions in the future – i.e., share those internal controls and procedures that are most effective.


Until FINRA changes the content it offers when reporting disciplinary actions, the regulators is providing a disservice to its member firms.


This case was reported in FINRA Disciplinary Actions for May 2017.

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016048923201.