According to FINRA, PFS Investments Inc. was censured and ordered to pay $710,738.55, plus interest, in restitution to customers who were overcharged on mutual fund purchases.

The case involved the firm's failure to properly supervise application of rights of reinstatement benefits offered by mutual fund companies. Rights of reinstatement allow investors who redeem mutual fund shares to reinvest in the same fund within a specified period without paying new sales charges.

PFS Investments, whose customers transact directly with mutual fund issuers, relied entirely on individual registered representatives and customers to manually identify when reinstatement discounts applied. The firm had no automated surveillance designed to flag instances where customers missed discounts for which they were eligible.

As a result, customers paid $710,738.55 in excess sales charges and fees that should have been waived under the mutual funds' rights of reinstatement provisions.

This case highlights an important investor protection issue. Mutual funds offer various breakpoints, waivers, and discounts that can significantly reduce the cost of investing. However, these benefits are often not automatically applied and require the broker-dealer to properly identify when customers qualify.

Investors should be aware of their rights under mutual fund prospectuses, including rights of reinstatement, breakpoint discounts for larger investments, rights of accumulation, and letter of intent provisions. Ask your financial advisor about these benefits and review your statements to ensure applicable discounts are being applied.

If you believe you may have been overcharged on mutual fund purchases, you may be entitled to restitution.