AXA Advisors LLC Complaint and Legal Claims Center
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Important Information You Should Know:
AXA Advisors is a securities brokerage firm which is licensed by FINRA.
Firms licensed through the Financial Industry Regulatory Authority, formerly the National Association of Securities Dealers (NASD), must comply with securities regulations and federal and state securities laws. When these firms violate regulations or laws they can face actions by regulators or by federal or state criminal prosecutors.
Very few “securities police” have the impossible duty to attempt to govern billions of dollars
in transactions each year, handled by hundreds of thousands of salespersons nationwide at thousands of securities firms. Approximately 660,000 registered salespersons at 5,300 securities firms handle hundreds of millions of transactions annually for over 60 million investors. It is impossible for securities regulators to police this activity.
Securities regulators and officials do not often recover losses for victims of securities fraud. Just as police give tickets and motorists usually hire attorneys to recover damages, victims of securities fraud hire attorneys to recover their losses. As well, claims against brokerage firms including AXA Advisors, can be for securities fraud, or for breach of duty, breach of contract, negligence and other claims not covered by securities regulations or statutes.
Claims against brokerage firms are almost always determined in securities arbitration.
When an account is opened at securities firms including AXA Advisors, investors sign documents which include agreements to arbitrate any dispute. The U.S. Supreme Court decided in 1987 that securities arbitration agreements are enforceable. Arbitration is a private proceeding which takes the place of court actions. Appeals of arbitration decisions to court are very limited and usually unsuccessful.
Investors represented by an attorney in securities arbitration are much more successful. Statistics prove that investors who file claims with the assistance of an attorney recover twice as often as those not represented. Only a small percentage of lawyers have ever represented an investor in arbitration and very few law firms nationwide have extensive experience with securities arbitration cases.
To learn whether you can recover losses through a claim against AXA Advisors
Contact Shepherd Smith Edwards & Kantas LTD LLP law firm for a free consultation with an attorney.
About Shepherd Smith Edwards & Kantas LTD LLP Law Firm:
Our law firm represents institutional and individual investors nationwide who have lost a substantial portion of their retirement or other assets. Our attorneys and staff have more than 100 years of combined experience in the securities industry and in securities law. Several of our lawyers and staff members served for years as a Vice President or Compliance Officer of major brokerage firms.
Each lawyer and staff person at our firm is devoted to assisting investors to recover losses caused by unsuitability, over-concentration, fraud, misrepresentation, self-dealing, unauthorized trades or other wrongful acts, whether intentional or negligent. We have handled thousands of cases against hundreds of large and small investment firms, including claims against firms such as AXA Advisors.
FINRA Fines AXA Advisors $1.2 Million for Fee-Based Account Violations, Orders Return of $1.4 Million in Fees to Approximately 1,800 Customers
Washington, D.C. — The Financial Industry Regulatory Authority (FINRA) announced today that it has fined AXA Advisors, LLC, $1.2 million for failing to adequately supervise its fee-based brokerage business and distributing misleading sales literature for its fee-based brokerage account program, CapAdvantage, between 2001 and 2005.
FINRA also ordered AXA Advisors to return $1.4 million in fees to approximately 1,800 customers who were inappropriately placed or kept in fee-based brokerage accounts. The firm is voluntarily refunding customers an additional $1.2 million, making the total amount returned to CapAdvantage customers more than $2.6 million. AXA Advisors also unilaterally took steps to enhance its system and procedures and to close accounts that were not appropriate for CapAdvantage. FINRA considered these steps taken by AXA Advisors in determining the sanctions in this case.
"When a firm offers a new service to customers, such as a fee-based brokerage account, it must tailor its supervisory systems to the newly offered product," said Susan L. Merrill, FINRA Executive Vice President and Chief of Enforcement. "AXA Advisors failed to put in place supervisory systems designed to ensure that its CapAdvantage fee-based account was appropriate for the customers it placed in the program. The firm also provided inaccurate information to brokers and customers about how fees would be assessed in these accounts."
In fee-based brokerage accounts, customers are charged an annual fee that is usually a percentage of the assets in the account with an annual minimum, rather than a commission for each transaction as in a traditional brokerage account. As a result, the compensation earned by the firm and the broker is generally not dependent on whether a customer buys or sells securities. These accounts first became available in 1999 as a result of a proposed Securities and Exchange Commission (SEC) rule that exempted brokers from certain elements of the Investment Advisers Act of 1940. In March of this year, a federal court struck down the final version of that SEC rule.
FINRA found that during the period when AXA Advisors developed CapAdvantage, prior to its 2001 launch, the firm was aware that fee-based brokerage accounts raised new supervisory and compliance issues. AXA Advisors designed the product for investors with a minimum balance of $50,000 and who were not "buy-and-hold" investors, but who would engage in at least some trading. While the firm instructed its brokers that low balance accounts, infrequently traded accounts, and several other classes of accounts required close monitoring, it failed to adequately supervise for these issues.
FINRA found that the firm's system and procedures were not reasonably designed to determine whether the program initially was, or remained, appropriate for customers opening CapAdvantage accounts. One result of this was that AXA Advisors allowed many investors with less than $50,000 in assets to open CapAdvantage accounts. For example, one customer opened a fee-based account with just $2,000 and AXA Advisors assessed fees until the account was depleted of all funds. The firm also allowed numerous customers to maintain accounts in the program and pay for those accounts even though they did no trading for years. For example, one customer maintained an average account balance of more than $3.5 million, but did no trades from 2002 through 2004. Yet, during that period, the firm deducted approximately $73,000 in asset-based fees.
It took AXA Advisors almost three years after introducing CapAdvantage to generate exception reports targeting its fee-based brokerage accounts. FINRA found that even after the creation of these reports, the firm did not have adequate follow-up. This was particularly egregious because approximately half of all CapAdvantage accounts appeared on an exception report that highlighted some of these issues.
In addition, FINRA found that AXA Advisors used written internal and external communications that were misleading. The firm told brokers and clients that CapAdvantage accounts would not be charged asset-based fees until the account reached $50,000. While this accurately reflected the firm's initial intention, it did not reflect how fees were actually charged. In fact, over 1,500 customers were charged fees before reaching the "minimum" account level.
The firm's communications also asserted that a benefit of CapAdvantage was that the interests of the client and the broker were aligned, because the broker's compensation was not linked to the number of transactions in the account. However, the firm required brokers to partially absorb ticket charges, so brokers made less money with each transaction, creating a potential conflict of interest between the broker and the client, particularly for clients with the least assets in these accounts.
Under the terms of the settlement announced today, customers who will receive refunds either did no trades for two years, or had less than the required minimum account balance for a year and were charged fees, or were charged fees prior to reaching the asset level that the firm said would trigger asset-based fees. Of the refunds ordered by FINRA, approximately $812,000 is being returned to 1,500 small account holders who were allowed to open a fee-based brokerage account with less than the required $50,000 minimum.
In settling this matter, the firm neither admitted nor denied the charges, but consented to the entry of FINRA's findings.