Finra Fines, Supends Ex-Ameriprise Broker Who Flipped ‘A’ Shares
(Updates with comment from an Ameriprise spokeswoman.)
The Financial Industry Regulatory Authority has fined and suspended a former Ameriprise Financial broker in Cincinnati, Ohio, who allegedly generated $450,000 in commissions from unsuitable mutual fund switches over two years.
Between January 2017 and March 2019, Bardeche recommended 112 short-term ‘switches’ of Class A mutual funds in 32 customer accounts, Finra said. Class A funds carry large up-front sales charges and “are generally only suitable as long-term investments.”
“Respondent did not have a reasonable basis to believe that this recommended pattern of switching and short-term liquidations of mutual fund Class A shares was suitable for customers,” Finra said in noting her violation of its suitability rule and 2010 “catch all” rule requiring “high standards of commercial honor.”
In some cases, Bardeche also made “costly back-to-back” switches, including recommending one customer sell Class A shares after 10 months, incurring $3,100 in new sales charges. Eight months later, Bardeche recommended the customer sell those shares and buy other Class A shares that cost over $2,600 in commissions.
Finra separately said Bardeche made 109 trades in eight non-discretionary customer accounts without prior written authorization during the two-year period.
Bardeche, who began her career at Morgan Stanley in 2004 and is no longer registered as a broker, did not return a request for comment sent through LinkedIn, where she lists herself as a marketing associate for a medical device company. She settled without admitting or denying Finra’s allegations.
An Ameriprise spokeswoman said that the firm “quickly detected the activity through [its] supervisory system,” fired Bardeche and reimbursed clients.
“The advisor’s actions were in direct violation of our clear policies,” Alison G. Mueller wrote in an email.
Since 2019, Ameriprise has paid $380,000 in settlements to four of Bardeche’s former customers, according to BrokerCheck, which notes that the broker did not contribute to the amount.
Brokerage firms have been streamlining mutual fund share classes amid growing regulatory scrutiny in recent years. Ameriprise stopped selling A shares, which include upfront charges around 5.75%, in advisory accounts in 2016 in effort to comply with the Labor Department’s now-defunct fiduciary rule.
UBS Wealth Management USA switched to a single share class in commission-based accounts one year ago to comply with the Securities and Exchange Commission’s Regulation Best Interest that took effect on June 30.
Finra said it began investigating Bardeche based on Ameriprise’s U5 filing in April 2019. The firm fired her for “company policy violations related to failing to obtain authorization from clients prior to placing trades and mutual fund trading activity,” according to BrokerCheck.
Bardeche said in a comment appended to her BrokerCheck record that the discharge was “unjustified” and “strongly” disputed the alleged violations.
“I have always discussed every transaction with every client, prior to execution,” the broker wrote. “I dispute the assertion that I violated company policy concerning mutual fund trading activity; I thoroughly discussed every mutual fund transaction made on behalf of a client, and completed firm documentation reflecting the purposes of each such transaction.”