Broker-Dealer Settles FINRA Charges for Reg BI Failures on UIT Redemptions

A broker-dealer settled FINRA charges for failing to comply with its duty of care obligations under Regulation Best Interest ("Exchange Act Rule 15l-1") regarding unit investment trust recommendations.

FINRA found that during the relevant period, the firm possessed no written policies addressing UIT recommendations or early redemptions and subsequent updates failed to require supervisors to consider the costs associated with such recommendations. FINRA found the firm relied on automated reports that did not identify early redemptions, resulting in the approval of every early redemption reviewed and a failure to supervise a representative whose recommendations caused customers to incur $176,590.57 in unnecessary sales charges.

FINRA found the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade"), 3110 ("Supervision"), and Exchange Act Rule 15l-1 ("Regulation Best Interest").

The firm consented to a censure, a $75,000 fine, and restitution of $176,590.57 to eligible customers. The company also agreed to an undertaking requiring a registered principal to certify that the firm remediated the identified issues and implemented a supervisory system reasonably designed to achieve compliance with Regulation Best Interest.