About 450 securities firms will contact mutual fund investors over the next three months about possible refunds totaling at least $85 million.
Brokerage companies under scrutiny have until the end of January, 2004 to notify millions of investors that they may have been overcharged for their mutual fund investments, National Association of Securities Dealers, Inc. (NASD) Executive Vice President Elisse Walter told reporters after a securities industry conference last week.
At issue are volume discounts—called breakpoint discounts—given to investors who purchase large blocks of Class A mutual fund shares.
The NASD has found that discounts were not given in about one of five eligible transactions, and estimated that at least $85 million is owed to investors for 2001 and 2002 alone.
Walter said financial companies will send letters, written by NASD, to individual investors asking them to fill out a form if they think they might have been overcharged. From there, the companies would have to review all of the customer's past transactions and determine whether the customer deserves a refund and, if so, for how much. All money owed to investors must be returned "promptly," Walter said.
The NASD had initially required 625 securities firms to determine for themselves whether they failed to process the discounts. Since then, about 20 firms have received notices that they might be subject to disciplinary action, Walter said. Nearly 175 of the roughly 450 securities firms accused of keeping poor records of providing breakpoint discounts have been ordered to review transactions going back to the start of 2001.