Massachusetts Fines Broker-Dealer Over Improper Mutual Fund Sales
The Massachusetts Securities Division has fined Janney Montgomery Scott LLC more than $286,000 and ordered the broker-dealer to pay nearly $164,000 in restitution to investors after one of its brokers engaged in short-term trading of mutual funds.
The Massachusetts Securities Division has fined Janney Montgomery Scott LLC more than $286,000 and ordered the broker-dealer to pay nearly $164,000 in restitution to investors after one of its brokers engaged in short-term trading of mutual funds.
In a complaint filed last year, the state regulators accused Janney Montgomery of failing to supervise its agent, Stephen Querzoli, for short-term trades involving Class A shares of mutual funds. Querzoli purportedly generated nearly $200,000 in commissions and fees over a 6-year period.
Class A shares typically have front-loaded fees and lower annual expenses compared with other class shares. Though such shares are generally held for periods of three-to-five years or more, the regulators claim that Querzoli would frequently sell the shares after a few months and use the proceeds to purchase new mutual funds, driving up commissions charged to customers by thousands of dollars.
“Janney did little to stop its agent’s improper sales practices, leaving him unchecked even after opening their own inquiry three years into the time period during which the inappropriate sales were taking place,” the Massachusetts Securities Division said in a statement.
In addition to the fine and restitution, the regulators requires Janney Montgomery to conduct a full review of its policies and procedures relating to the short-term trading of Class A shares of mutual funds to ensure compliance with state and federal laws.
