Merrill to Repay Fund Overcharges

Merrill Lynch & Co., the biggest U.S. securities firm by capital, plans to pay about $11 million to reimburse more than 20,000 mutual fund buyers who were overcharged.

“We will be mailing checks and providing reimbursements within the next 2 1/2 weeks” to investors who paid too much in fees since 2001, Merrill spokesman Mark Herr said Thursday. The firm is reviewing records for 1999 and 2000 and expects to send letters to other customers who may have overpaid, he said.

Securities regulators asked 2,000 broker-dealers in March to review their mutual fund sales records after a study found that investors didn’t get the upfront sales discounts they were entitled to almost a third of the time.

The $7.1-trillion fund industry often reduces the fees it charges for investments when they exceed $50,000, known as a breakpoint. The review by regulators of 43 firms, undertaken between November 2002 and January, found that the average discount withheld was $364 per transaction. Merrill’s average reimbursement will be $145, Herr said.

The National Assn. of Securities Dealers has identified at least $86 million of industrywide breakpoint violations during the last two years.

NASD and the Securities and Exchange Commission conducted separate investigations of the fees that brokerages charge investors.

The SEC asked 5,500 brokerages to report on procedures for ensuring that mutual fund investors get promised discounts on upfront sales fees. Inspections of dozens of firms yielded evidence that customers weren’t receiving the breakpoints.

Most of the problems didn’t appear to be intentional, the SEC said in March. The biggest causes for not providing the discount were that brokerage companies didn’t count funds owned in the same fund family and didn’t look at funds owned by a spouse or children, the SEC said.