← Broker database 2023-11-06
Robert W. Baird Ordered to Pay Over $519,000 in Restitution for Mutual Fund Sales Charge Failures
According to FINRA, Robert W. Baird & Co. Inc. was ordered to pay $519,646.23, plus interest, in restitution to customers for failing to provide certain customers with mutual fund sales charge waivers and fee rebates to which they were entitled through rights of reinstatement.
The firm's supervisory system for providing rights of reinstatement benefits was not reasonably designed in two critical respects. First, the firm relied on an automated alert designed primarily to monitor switches within 90 days of a prior sale, which failed to capture transactions eligible for reinstatement privileges because many funds' reinstatement periods exceeded 90 days. Second, the firm's review of these alerts was based on manual review of random samples, which was ineffective for confirming whether eligible customers received reinstatement privileges.
As a result of these supervisory deficiencies, customers paid $519,646.23 in excess sales charges and fees that they should not have been charged. The firm has since paid full restitution plus statutorily calculated interest to affected customers and enhanced its supervisory system to prevent future occurrences.
This case illustrates the importance of firms implementing comprehensive systems to ensure customers receive all applicable discounts and waivers. Rights of reinstatement allow investors who recently sold mutual fund shares to repurchase them without paying front-end sales charges again within certain timeframes. When firms fail to properly identify and apply these benefits, investors pay unnecessary fees that reduce their investment returns. Investors should review their account statements and question any unexpected sales charges on mutual fund purchases.