Broker-Dealer Fined for Supervisory Violations in Connection with UIT Transactions

A broker-dealer agreed to settle FINRA charges for supervisory violations in connection with recommendations of potentially unsuitable early rollovers of investments in Unit Investment Trusts ("UITs").

According to FINRA, between January 2012 and December 2016, the firm failed to establish and maintain a supervisory system, and written supervisory procedures, that were reasonably designed to enable it to identify "potentially unsuitable" early UIT rollovers recommended by its representatives. FINRA determined that these recommendations resulted in an estimated $1.9 million in sales charges to customers. The firm also allegedly sent numerous switch letters to customers containing false information as to rollover costs. FINRA estimated that the firm's representatives underestimated costs by an average of nearly half. As a result, FINRA found that the firm violated NASD Rule 3010, FINRA Rule 3110 ("Supervision"), and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

Without admitting to or denying charges, the firm agreed to (i) a censure, (ii) a $1.75 million fine, and (iii) payment of nearly $1.9 million in restitution to customers.