Investigation Into Improper Sales And Switches of Unit Investment Trusts
Morgan & Morgan’s Business Trial Group and its securities attorneys are investigating improper early sales and switches of Unit Investment Trusts (UITs).
Earlier this year, Stifel Nicolaus – a FINRA-member brokerage firm – agreed to pay more than $3.6 million for improper sales and premature rollovers of UITs. Of the $3.6 million, $1.9 million repaid over-charges to over 1,700 customers, and a $1.75 million fine was imposed for allegedly providing inaccurate information on rollover costs and for related supervisory breaches.
Stifel allegedly failed to detect potentially improper early rollover transactions from 2012 through 2016. Recommendations to sell a UIT early – before its maturity date – and buy another virtually identical UIT can generate substantial extra commissions of 3% or higher.
Stifel also allegedly understated switching costs to hundreds of customers by nearly 50 percent, or failed to discuss them at all, according to FINRA.
FINRA alleged that Stifel was aware of problems with early-sales alerts in its automated supervisory system since 2012, but failed to inform branch managers. FINRA also said that Stifel’s backup system was poorly designed and stopped working in 2015.
FINRA enforcement head Jessica Hopper said: “Firms must have an adequate supervisory system in place to detect potentially unsuitable UIT rollovers, and also provide customers with accurate information so they can make informed decisions about those rollover recommendations.”
Other brokerage firms have agreed to similar sanctions relating to improper UIT sales and switches. FINRA fined Cambridge Investment Research $150,000 earlier this year for disregarding supervisory alerts relating to short-term UIT trades. In 2019, Oppenheimer & Co. paid $3.87 million in restitution to customers. Also in 2019, Raymond James Financial settled with the SEC for $15 million for overcharging customers more than $6 million for UIT trades. In 2017, Morgan Stanley paid a $3.5 million fine and was ordered to refund nearly $10 million to customers.
If your financial advisor or stockbroker recommended an early sale or switch of a UIT, you may be entitled to compensation. The securities attorneys at Morgan & Morgan’s Business Trial Group are here to help. Please contact us at 888.744.0142 or online for a free consultation.
The Business Trial Group at Morgan & Morgan helps investors recover their losses on a contingency basis. We are only paid if we successfully recover money for you. We have helped investors recover tens of millions of dollars of investment losses. The Business Trial Group is part of the largest contingency law firm in the nation, with over 700 lawyers and offices nationwide.