FundEX settles with the MFDA for $300KBy The IJ Staff | September 18 2019 11:30AM
The Mutual Fund Dealers Association (MFDA) announced recently that it has approved a settlement agreement with FundEX Investments. In the agreement, FundEX agrees that it failed to supervise several approved persons, several of whom have already been sanctioned by the MFDA.
It agreed that it failed to ensure that complaints about its approved persons were handled fairly, that it did not have adequate procedures in place to monitor client holdings and that it was unable to identify the sale of unapproved products. FundEX also admits that its branch review program did not ensure in all instances that on-site compliance reviews were conducted at least once every three years.
Among the list of allegations outlined in a statement of agreed facts, the MFDA found that FundEX failed to adequately supervise one agent who failed to ensure that investment recommendations made to his client were suitable when he placed 100 per cent of the client’s portfolio in illiquid exempt market securities.
It failed to ensure complaints were handled fairly when clients complained about two more approved persons who sold securities outside of their licensing with FundEx. It failed to adequately supervise concentration risk in accounts serviced by a fourth and a fifth approved person, both of whom recommended their clients invest in precious metal sector funds without doing adequate due diligence.
Although MFDA staff advised FundEX that it had concerns about the remedial measures being undertaken to fix the concentration risk in over 150 different accounts, it says the company did not adequately supervise the approved person’s activities, which resulted in concentration concerns going unresolved. Finally, it says FundEX failed to ensure client complaints were handled fairly after an eighth approved person processed a series of unauthorized redemptions and misappropriated at least $69,035 from six clients.
Under the terms of the settlement, FundEX Investments agrees it will pay a fine of $250,000 plus costs of $50,000.