Massachusetts securities regulators have fined Janney Montgomery Scott over $286,000 and ordered the firm to pay nearly $164,000 in restitution to investors over a broker’s frequent sale of mutual funds with higher front-loaded fees.
In a complaint filed last year, state regulators alleged Janney failed to supervise agent Stephen Querzoli’s short-term trading of Class A shares of mutual funds. The state charged that the trading harmed investors, while generating nearly $200,000 in commissions and fees over a six-year period.
Because Class A shares typically have front-loaded fees and lower annual expenses compared with other class shares, they generally are held for periods of three to five years or more. But regulators said Querzoli would frequently sell such mutual funds after a few months and use the sales proceeds to purchase new mutual funds. That drove up commissions paid by customers by thousands of dollars, the state regulators said in a release.
Janney did little to stop its broker’s sales practices, leaving him unchecked even after opening their own inquiry three into the time period during which the inappropriate sales were taking place, according to regulators.