Articles Posted in FINRA News


FINRA has issued an investor alert informing investors that they may be eligible to receive partial refunds of the front-end sales charges paid on Class A mutual fund shares. According to FINRA, an “industry-wide survey” found that investors failed to receive discounts in roughly “one out of every five” eligible transactions.

While front-end sales load discounts are typically offered for bigger mutual fund investments, often beginning at $50,000, they occasionally beginning at investments “as low as $25,000,” according to the alert. FINRA requires securities firms to give refunds to customers who did not receive discounts they were entitled to receive. To determine whether you might be entitled, FINRA recommends asking the following questions: did you purchase a mutual fund with a front-end sales load? Did you purchase more funds in the same mutual fund family? Did any of your family members buy shares in this mutual fund or family of mutual funds? Does the total of all of these purchases exceed $25,000?

As FINRA’s alert explains, mutual fund breakpoint discounts are discounts that decrease the front-end sales charge on many mutual fund Class A shares. Those sales charges, or “loads,” typically vary by the amount invested. FINRA offers the example of a 5.75% front-end load at a cost of $1,000: “you’ll pay a sales load of $57.50, with the remaining $942.50 invested in the mutual fund.” Breakpoints are discounts on that load, and they increase with the size of the investment.

Simplified Arbitration

Publicly available records provided by the Financial Industry Regulatory Authority (FINRA) and accessed on July 31, 2018, as well as a news article on The National Law Review report that FINRA has amended its rules to offer investors a new option for simplified arbitration proceedings.

According to Regulatory Notice 18-21, which FINRA published on July 23, 2018, FINRA’s current rules provide two options for arbitration proceedings where the parties of claims of $50,000 or less, not including interest and expenses. One is a decision by a lone arbitrator, which the arbitrator makes after reading the parties’ pleadings and any other materials they submit. The other is a full hearing with a single arbitrator. These procedures are provided by two separate codes: the Code of Arbitration Procedure (“Customer Code”) and the Code of Arbitration Procedure for Industry Disputes (“Industry Code”). The former allows a customer to request a hearing whether they are a claimant or a respondent, and the latter only allows claimants to request hearings. Hearings are generally held in person, the notice notes, and “there are no limits on the number of hearing sessions that can take place.” According to the Notice, FINRA amended these codes to offer a new hearing option for arbitration proceedings in circumstances where the parties have claims of $50,000 or less. The new option is “subject to regular provisions of the Codes relating to prehearings and proceedings, including all fee provisions,” though it has a number of “limiting conditions.” These conditions are designed to provide the parties “an opportunity to present their case… in a convenient and cost-effective manner” without all the demands of a traditional hearing. Per FINRA, these conditions are:

-Unless the parties agree to an alternative method, the hearing is held over the phone

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