by Howard Haykin

The FINRA Mutual Fund Waiver Sweep, initiated in May 2016, netted sanctions against at least 4 broker-dealer firms. Each was charged with failing to ensure that mutual fund sales charge waivers were provided to eligible accounts – including retirement plan or charitable accounts.  

In settling those FINRA charges, the 4 firms agreed to pay, in total, some $1,670,000 in fines, restitution and pre-judgment interest. They were:

1. FSC Securities Corporation (Atlanta, GA) will pay ~$515,000.
2. Royal Alliance Associates (Jersey City, NJ) will pay ~$670,000.
3. SagePoint Financial (Phoenix, AZ) will pay ~$271,000.
4. Woodbury Financial Services (Oakdale, MN) will pay ~$214,000.

While researching the profiles of each firm, I came across some interesting “coincidences” - beginning with the fact that they are all wholly-owned subsidiaries of Advisor Group. In addition, 3 of the firms - FSC Securities, Royal Alliance and SagePoint - were sanctioned by the SEC for similar mutual fund sales violations in March 2016. In that settlement, which cost over $9.5 million in fines, disgorgement and prejudgment interest, the firms allegedly placed certain advisory clients in mutual fund shares classes with higher expense costs when lower expense cost shares classes of those funds were available. 

INTERLOCKING DIRECTORATE.    But here's where things get interesting - the 4 B/D firms share many of the same Executive Officers – forming something akin to an “Interlocking Directorate.” (according to their CRD Files)   

EXECUTIVE OFFICERS ASSOCIATED WITH ALL 4 FIRMS

►    Robert John Guldner - CCO, Investment Advisory.

►    Cynthia A. Hamel - Director, COO, EVP.

►    Nina Schloesser Mckenna – EVP, Secretary

►    David Martin Schmidt - Treasurer and Financial Principal, FinOp.

►    Thomas Blake Sidlo - Municipal Principal.

EXECUTIVE OFFICER ASSOCIATED WITH 3 FIRMS

►    James Dale Price - Chairman

EXECUTIVE OFFICERS ASSOCIATED WITH 2 FIRMS

►    John Joseph Dillon – VP, CCO.

►    Justin Ives Sacca – VP, CCO.

EXECUTIVE OFFICERS ASSOCIATED WITH JUST 1 FIRM

►    Richard David Fergesen – Director, CEO, President of Woodbury Financial Services.

►    Derek David Burke - Director, CEO, President of FSC Securities Corporation.

►    Jeffrey Michael Auld - Director, CEO, President of Sagepoint Financial.

►    Dmitry Nmn Goldin - Director, CEO, President of Royal Alliance Associates.

FINANCIALISH TAKE AWAY.    It's no small wonder these firms engaged in like-minded manipulative transactions.