PFS Investments Inc. has been censured and ordered to pay $710,738.55 in restitution after the Financial Industry Regulatory Authority (FINRA) found the firm failed to properly supervise the application of mutual fund sales charge waivers and fee rebates.
PFS Investments to Repay $710,000 Over Mutual Fund Fee Failures
FINRA explained that between August 2019 and July 2024, customers entitled to cost reductions through “rights of reinstatement,” a benefit allowing investors to reinvest in certain funds without incurring front-end sales charges or to reclaim deferred sales charges, were charged excess fees.
The shortfall is attributed to the firm’s reliance on manual processes, which left the responsibility for requesting discounts with registered representatives and clients. FINRA found PFS had no automated system to identify missed benefits.
The oversight led to customers paying more than $710,000 in unnecessary charges. PFS, which is headquartered in Duluth, Georgia and has around 19,000 registered representatives, is said to have violated FINRA Rules 3110(a) and 2010, which require effective supervision and high standards of conduct.
FINRA acknowledged the firm’s “extraordinary cooperation,” including engaging an external consultant, identifying affected clients, and establishing new supervision processes.
PFS has already repaid $90,563.18 to some customers and will complete repayments with interest by early 2025.
The restitution will be made under a written plan approved by FINRA, and any unclaimed funds will be handled in accordance with state unclaimed property laws.
FINRA stated that no monetary fine was imposed in light of the remedial actions taken.
