FINRA Sanctions 12 Firms a Total of $6.7 Million for Failing to Apply Sales Charge Discounts to Customers' Purchases of UITs
More than $4 Million in Restitution Ordered to Affected Customers
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has ordered 12 firms to pay restitution totaling more than $4 million and fines totaling more than $2.6 million for failing to apply available sales charge discounts to customers' purchases of Unit Investment Trusts (UITs), and related supervisory failures.
FINRA imposed sanctions against the following firms:
- First Allied Securities, Inc. of San Diego, CA, was ordered to pay $689,647 in restitution and fined $325,000.
- Fifth Third Securities, Inc. of Cincinnati, OH, was ordered to pay $663,534 in restitution and fined $300,000.
- Securities America, Inc. of La Vista, NE, was ordered to pay $477,686 in restitution and fined $275,000.
- Cetera Advisors LLC of Denver, CO, was ordered to pay $452,622 in restitution and fined $250,000.
- Park Avenue Securities LLC of New York, NY, was ordered to pay $443,255 in restitution and fined $300,000.
- Commonwealth Financial Network of Waltham, MA, was ordered to pay $357,521 in restitution and fined $225,000.
- MetLife Securities, Inc. of New York, NY, was ordered to pay $349,748 in restitution and fined $300,000.
- Comerica Securities of Detroit, MI, was ordered to pay $197,757 in restitution and fined $150,000.
- Cetera Advisor Networks LLC of El Segundo, CA, was ordered to pay $151,108 in restitution and fined $150,000.
- Ameritas Investment Corp. of Lincoln, NE, was ordered to pay $128,544 in restitution and fined $150,000.
- Infinex Investments, Inc. of Meridian, CT, was ordered to pay $109,627 in restitution and fined $150,000.
- The Huntington Investment Company of Columbus, OH, was ordered to pay $60,973 in restitution and fined $75,000.
Brad Bennett, FINRA's Executive Vice President and Chief of Enforcement, said, "Firms need to ensure that their registered representatives are providing customers the sales charge discounts to which they are entitled. The firms sanctioned today failed to provide these discounts, resulting in customer harm in the form of higher costs for which customers have been or will be reimbursed."
A UIT is a type of investment company that offers redeemable units of a generally fixed portfolio of securities that terminate on a specific date. UIT sponsors generally offer sales charge discounts to investors, known as "breakpoint discounts" and "rollover and exchange discounts." A breakpoint discount is a reduced sales charge based on the dollar amount of the purchase-the higher the amount the greater the discount. Breakpoints generally function as a sliding reduction in the sales charge percentage available for purchases, usually beginning at $25,000 or $50,000 (or the corresponding number of units). A rollover or exchange discount is a reduced sales charge that is offered to investors who use the termination or redemption proceeds from one UIT to purchase another UIT.
In March 2004, FINRA issued a Regulatory Notice to firms titled, Unit Investment Trust Sales, to remind broker-dealers that they should develop and implement procedures to ensure customers receive appropriate sales charge discounts for UITs.
In concluding these settlements, the firms neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2014, members of the public used this service to conduct 18.9 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999. Investors may find copies of this disciplinary action as well as other disciplinary documents in FINRA's Disciplinary Actions Online database. Investors can also call FINRA's Securities Helpline for Seniors at (844) 57-HELPS for assistance or to raise concerns about issues they have with their brokerage accounts and investments.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, and informing and educating the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers the largest dispute resolution forum for investors and firms. For more information, please visit www.finra.org.