Vanguard was fined $800,000 by FINRA in the latest scandal for miscalculating reports and neglecting customer concerns.
According to Investment News, Finra ordered Vanguard to pay an $800,000 fine for issuing misleading account statements to money market customers and failing to respond to them when they indicated something was wrong.
The Financial Industry Regulatory Authority Inc. (FINRA) found that from November 2019 to September 2020, Vanguard Marketing Corp. miscalculated the estimated annual yield and annual income for nine money market funds on approximately 8.5 million account statements, according to the Finra order posted on Thursday.
The firm failed to update the yield data due to “a technical issue where newer information received through an automated data feed did not overwrite certain existing data,” which led to the yield and income projections being overstated.
After FINRA began its investigation, Vanguard self-reported other problems on money market account statements that resulted in miscalculation of investment return.
One occurred when customer contributions to an account were identified as an increase in market value instead of a cash deposit.
This error affected approximately 23,000 statements from October 2019 to June 2021.
Another misstep involved reflecting margin credits and debits as market appreciation or depreciation.
This error affected 57,000 statements between October 2019 and June 2021.
From October 2019 to March 2021, the firm received communications from 100 customers who pointed out miscalculations and other errors on their statements.
It failed to investigate promptly, Finra said, but did correct the statements after finally looking into the problems.
Vanguard accepted the fine without admitting or denying the charges.
FINRA Fines 5 Other Brokerages
FINRA recently fined 5 other brokerages for compliance failures related to the broker-dealer standard of conduct, Regulation Best Interest, and a related disclosure document, Form CRS.
The agency found that some firms lacked policies and procedures to ensure that their registered representatives adhered to Reg BI, which prohibits them from putting their financial interests ahead of their customers’ interests in achieving as high a return as possible.
Some firms missed deadlines for making available Form CRS — which outlines a firm’s services, fees, conflicts of interest, disciplinary history and other information — or omitted required information from the form.
Two firms were cited for both Reg BI and Form CRS violations.
“The actions illustrate Finra’s continuing crackdown on compliance shortcomings related to the conduct standard that the Securities and Exchange Commission implemented in June 2020,” says Investment News.
The five brokerages fined for a total of $185,000 were DMK Advisor Group, Harpeth Securities, Highlander Capital Group, Axos, and American Wealth Management.
- DMK Advisor Group $35,000 fine
- Harpeth Securities $35,000 fine
- Highlander Capital Group, $5,000 fine
- Axos $75,000 fine
- American Wealth Management $35,000 fine
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