Financial Firms: UBS Settles with Virginia’s Regulator over Broker’s Unsuitable Recommendations, FINRA Fines Texas Broker-Dealer $225K for Mutual Fund Sales Violations, and an Ex-Client Seeks $500K from Carson Wealth while Alleging Excessive Fees

Virginia Regulator Fines UBS Financial After Its Broker Makes Unsuitable Recommendations
To settle charges brought by Virginia’s State Corporate Commission accusing a UBS (UBS) broker of making unsuitable recommendations involving gold and precious metals securities to 18 clients, UBS Financial Services will pay $319K—$289K to the clients and $30K to the state.

Virginia’s regulator contends that unsuitable recommendations were made in 2013 and 2014 and caused UBS clients to hold an overconcentration of these securities, which were not even suitable for some of them. The state said that this violated its securities rules.

UBS is settling the case without denying or admitting to the regulator’s findings.

Kestra to Pay Retirement Plans and Charitable Organizations Back $1.95M Over Missed Mutual Fund Fee Waivers
The Financial Industry Regulatory Authority (FINRA) has fined Kestra Investment Services, a Texas-based brokerage firm, $225K for not granting fee waivers to certain charitable organizations and retirement plans when they purchased certain mutual fund share classes. Kestra was previously called NFP Advisor Services. It is a subsidiary of Kestra Financial.

According to the self-regulatory authority (SRO), between 2009 and 2018, Kestra sold costlier mutual fund class shares that came with higher fees to more than 3,200 customers, even though they qualified for waivers on said fees. As a result, these clients were overcharged $1.6M in mutual fund fees. Now, Kestra has agreed to pay back these customers, with interest, about $1.9M.

The excess charges were a result of Class A mutual fund sales, which usually charge up-front sales fees. However, these fees are waived by some fund companies for certain qualifying clients, including charitable organizations and retirement plans.

FINRA found that Kestra did not apply these waivers when clients were eligible. Instead, the SRO contends, it either sold these customers the Class A shares with the front-end sales fee or sold them Class C or B mutual fund shares, which came with higher ongoing fees and costs,and some even with back-end sales fees.

FINRA said the firm did not have the proper written guidance or training in place to make sure that Kestra brokers applied the waivers when customers qualified for them. This fine by the SRO against Kestra comes three years after the regulator fined the firm for improper training and supervision related to annuity sales.

Former Client Pursues Carson Wealth, Alleges Excessive Fees
A former client of registered investment adviser (RIA) Carson Wealth Management (CWM), is seeking $500K in damages. The RIA is run by wealth management adviser Ron Carson.

The ex-client, who filed a securities arbitration claim, contends that Carson Wealth improperly told a product sponsor that the client no longer worked with the firm, causing the client to be charged the sponsor’s standard rate rather than the negotiated rate that the firm had procured for its clients.

It is not uncommon for advisory firms to negotiate a lower fee rate for their clients from product sponsors than what the latter would charge the general public. According to InvestmentNews, the investment products at issue involved “direct investments” and limited partnerships, which are both usually illiquid.

Financial Planning reports that in an emailed statement, Ron Carson disputed the allegations. He contends that the firm negotiated to save and make the client millions of dollars. Mr. Carson is a registered broker with Cetera Advisors Network. He was previously with LPL Financial (LPLA) for almost 30 years.

Broker Misconduct – SSEK Law Firm
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