Twelve financial firms will pay over $4 million in restitution and fines of over $2.6M for purportedly not applying sales charge discounts to the sale of Unit Investment Trusts. The fines are also for supposed supervisory failures.
The firms and the payments they will make include:
• First Allied Securities, Inc., which will pay over $689K in restitution and a $325K fine.
• Huntington Investment Company, which will pay over $60K in restitution and a $75K fine.
• Fifth Third Securities, Inc., which will pay over $663K in restitution and a $300K fine.
• Infinex Investments, Inc., which will pay over $109K in restitution and a $150K fine.
• Securities America, Inc., which will pay over $477K in restitution and a $275K fine.
• Ameritas Investment Corp., which will pay over $128K in restitution and a $150K fine.
• Cetera Advisors LLC, which will pay over $452K in restitution and a $250K fine.
• Park Avenue Securities LLC, which will pay over $443K in restitution and a $300K fine.
• Comerica Securities, which will pay over 151K in restitution and a $150K fine.
• Commonwealth Financial Network, which will pay over $357K in restitution and a $225K fine.
• Cetera Advisor Networks LLC, which will pay over $151K in restitution and a $150K fine.
• MetLife Securities, Inc., which will pay over $349K in restitution and a $300K fine.
A UIT is an investment company that offers a redeemable unit of a portfolio of securities that is usually fixed and will end on a certain date. Although yearly operating costs are not very high, there are sales charges up front, as well as deferred sales charges, development fees, creation fees, and organization costs.
The sponsors of UITs usually offer breakpoint discounts, which is a lower price determined by the dollar amount of the purchase. The greater the purchase, the larger the discount. They also typically offer exchange discounts, also known as rollover discounts. This is a lower sales charge offered to investors who use the proceeds from the redemption or termination of one UIT to buy another one.
The plaintiffs claim that because they didn’t get the warranted discounts, they ended up paying more for their purchases. By settling, the firms are not admitting to or denying the findings.
FINRA Sanctions 12 Firms a Total of $6.7 Million for Failing to Apply Sales Charge Discounts to Customers’ Purchases of UITs, FINRA, October 20, 2015