FINRA Sanctions Barclays Capital, Inc. $13.75 Million for Unsuitable Mutual Fund Transactions and Related Supervisory Failures

The Financial Industry Regulatory Authority (FINRA) has ordered Barclays Capital, Inc. to pay over $10 million in restitution, including interest, to affected customers for mutual fund-related suitability violations. These suitability violations relate to an array of mutual fund transactions including mutual fund switches. Additionally, the firm failed to provide applicable breakpoint discounts to certain customers. Barclays was also censured and fined $3.75 million.

According to the News Release, FINRA found that from January 2010 through June 2015, Barclays’ supervisory systems were not sufficient to prevent unsuitable switching or to meet the firm’s obligations regarding the sale of mutual funds to retail brokerage customers. As a result, during the five-year period, there were more than 6,100 unsuitable mutual fund switches resulting in customer harm of approximately $8.63 million.

FINRA also found that the firm failed to provide adequate guidance to supervisors to ensure that mutual fund transactions for its retail brokerage customers were suitable based upon customer investment objectives, risk tolerance and account holdings. During a six-month review, 1,723, or 39 percent of mutual fund transactions were found to be unsuitable, with 343 customers experiencing financial harm totaling more than $800,000, including realized losses.

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