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Regulatory Sanctions

Legend Equities Closes Its Books by Settling Charges from FINRA Mutual Fund Sweep Exam

July 12, 2017

In January 2017, Legend Equities Corporation notified FINRA of its intent to wind down its business and withdraw its registration as a broker-dealer. In June 2017, FINRA announced that the firm had agreed to settle FINRA charges that it had sold mutual fund shares carrying sales loads to certain types of customers that were eligible to purchase those shares without any type of sale charge. The charges arose from a sweep examination that FINRA conducted in 2016 - which has led to settlements with 4 other broker-dealers.


As part of this settlement, Legend Equities must provide FINRA with a plan to remediate eligible customers who qualified for, but did not receive, the applicable mutual fund sales-charge waiver. It’s estimated that eligible customers are due an estimated $2.3 million in restitution and interest.


FINRA did not assess Legend Equities with a fine - perhaps owing to the firm’s “extraordinary cooperation” in this matter. Each of the other 4 broker-dealers were assessed fines.


BACKGROUND.   Legend Equities, a FINRA member since 1993, is based in Palm Beach Gardens, FL. In January 2017, the Firm notified FINRA of its intent to wind down its business and withdraw its registration as a broker-dealer. The firm had conducted a general securities business, with a sales force of more than 540 registered reps operating out of more than 170 branch offices throughout the United States.


FINRA FINDINGS.    Over a 7-1/2-year period, from July 1, 2009 to January 1, 2017, Legend disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge. These Eligible Customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses.


OTHER FIRMS THAT SETTLED SWEEP CHARGES.    In April, FINRA identified settlements with 3 broker-dealers – (i) Investment Centers of America; (ii) National Planning Corporation Investment Centers of America; and, (iii) SII Investments. [fFor details, click on FINRA Sweeps B/D’s That Sold Loaded Mutual Funds to Charities & Other Exempted Accounts.]


In May, FINRA identified a settlement with Citizens Securities.


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

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016050259801.