Southwest Sanctioned for Mutual Fund Overcharges
The SEC and NASD sanctioned Southwest Securities, Inc. for failing to provide mutual fund breakpoint discounts. Southwest was required to reimburse clients and take corrective measures to prevent future wrongdoing. Breakpoint discounts are volume discounts on front-end sales charges on Class A mutual fund shares (front-end loads). Examinations of broker-dealer firms indicated many mutual fund investors were not receiving available discounts (with brokers and their firms thus earning higher commissions). Of the 15 firms made the subject of the regulators’ sanctioning order, Southwest Securities had the worst record of discounts delivered to clients during the period surveyed. Almost 90% of Southwest clients who could have received break-point discounts did not.