FINRA reaches settlements with 6 firms over failing to supervise early rollovers

On Behalf of | Dec 17, 2021 | FINRA Compliance

The Financial Industry Regulatory Authority announced that it has reached settlements with six of its member firms over their failures to reasonably supervise early rollovers of unit investment trusts, or UITs. The authority said it has obtained $16.8 million in restitution for about 10,000 investors who were affected by excessive sales charges.

UITs offer shares in a fixed portfolio of securities that are designed to be bought and held until a specific maturity date. Investors who sell before the maturity date and roll over the funds into a new UIT face higher sales charges than if the funds were held until maturity.

The settlements followed a targeted examination of UITs that was launched by FINRA after it was determined that one firm had not reasonably supervised early UIT rollovers in the accounts of thousands of customers. After that firm paid restitution and a fine, FINRA then found similar issues at six other firms who all agreed to the settlements. In addition to the restitution paid to investors, the firms also are required to pay $6.6 million in fines.

“These cases should serve as a clear reminder to member firms to ensure their supervisory systems are reasonably designed to supervise sales of all the products they offer,” said Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement . “Firms should be particularly vigilant in identifying representatives who recommend trading strategies intended to generate commissions for the representative without regard for the intended use of the product.”

The Chicago FINRA investigation attorneys at Lewitas Hyman have decades of experience representing clients with respect to examinations, investigations and enforcement proceedings initiated by the SEC, the Financial Industry Regulatory Authority, state securities regulatory agencies and other self-regulatory organizations. If your firm is facing an investigation from a regulatory agency, please contact our firm at (312) 291-4600 or through our online contact form.

Share This