Securities Arbitration Lawyer Blog
Iorio Altamirano LLP is investigating claims on behalf of B. Riley Wealth Management Inc. (“BRWM”) customers after the firm was ordered to pay more than $250,000 in restitution to clients by the Financial Industry Regulatory Authority (“FINRA”) for supervisory failures related to its 529 plan share-class recommendations. If you have lost money with BRWM or were advised to purchase particular share classes of 529 savings plans, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
B. Riley Wealth Management Inc. and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on December 30, 2020, following findings that between January 1, 2013, and June 30, 2018, the firm lacked a system reasonably designed to supervise representatives’ recommendations to customers to purchase certain share classes of 529 savings plans, in violation of MSRB Rule G-27. The AWC pointed out that BRWM:
- Failed to provide adequate guidance to its registered representatives about the importance of considering share-class differences when recommending 529 plans.
- Failed to provide supervisors with adequate guidance or information to properly evaluate the suitability of 529 share-class recommendations.
- Failed to establish controls designed to ensure consistent supervisory review at account opening.
- Failed to supervise 529 share-class recommendations executed through transactions made directly with plan fund companies.
As part of the AWC, BRWM was censured and ordered to pay over $250,000 in restitution to customers who purchased class C shares in accounts with young beneficiaries and long-term time horizons. Prior to the effective date of the FINRA AWC, the firm paid full restitution to the affected customers. However, a FINRA restitution order does not preclude investors from pursuing their own claims to seek restitution or other available remedies.
BRWM had self-reported potential issues voluntarily with its supervisory system and proposed a plan to remediate affected customers, which helped it avoid a fine from FINRA.
BRWM is a full-service broker-dealer with 53 branches and 285 registered representatives. The firm is headquartered in Memphis, Tennessee, and has been a FINRA member firm since March 1984. Before 2017, BRWM conducted business as Wunderlich Securities, Inc.
What are 529 Plans?
529 plans are tax-advantaged municipal securities designed to encourage saving for a designated beneficiary’s future educational expenses. Shares of a 529 plan are sold in different classes with different fee structures.
Class A shares generally impose a front-end sales charge but have lower annual fees compared to other classes. Class C shares generally impose no front-end sales charge but have higher annual fees than Class A shares.
As a result of these higher annual fees, Class C shares may be more expensive over an extended holding period. Class A shares are often a suitable option for accounts with younger beneficiaries and a longer investment horizon.
Municipal Securities Rulemaking Board (MSRB) Rules
529 plans are municipal securities, and the MSRB governs their sale.
Under MSRB Rule G-27(a), brokers, dealers, and municipal securities dealers must supervise the conduct of its municipal securities activities to ensure MSRB rules and federal securities laws compliance. Further, MSRB Rules G-27(b) and (c) require firms to establish and maintain a system, and to establish, maintain, and enforce written procedures, to supervise its municipal securities activities in a manner that is reasonably designed to achieve compliance with federal securities laws and MSRB Rules.
Between January 1, 2013, and June 30, 2018, BRWM was a designated broker-dealer for 25 state-sponsored 529 plans, and $32.9 million in BRWM customer assets were held in 529 plan accounts. BRWM registered representatives established all 529 plan accounts directly with 529 plan fund companies. In other words, the business was a “direct application” business executed outside BRWM’s electronic order entry and account systems.
If you have lost money with BRWM, contact New York securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.