- Ameritas Investment Corp. ($150,000 fine)
- Cetera Advisors, LLC ($250,000 fine)
- Cetera Advisor Networks LLC ($150,000 fine)
- Comerica Securities, Inc. ($150,000 fine)
- Commonwealth Financial Network ($225,000 fine)
- Fifth Third Securities, Inc. ($300,000 fine)
- First Allied Securities, Inc. ($325,000 fine)
- Infinex Investments, Inc. ($150,000 fine)
- MetLife Securities, Inc. ($300,000 fine)
- Park Avenue Securities, LLC ($300,00 fine)
- Securities America, Inc. ($275,000 fine)
- The Huntington Investment Company ($75,000 fine)
FINRA’s Department of Enforcement took the lead and investigated the aforementioned broker-dealers’ sale of UITs and their failure to apply sales charge discounts to eligible purchases. A UIT is a type of investment Company that issues securities, typically issued in the form of “units,” representing undivided interests in a relatively fixed portfolio of securities. UITs generally are issued by a sponsor who creates the UIT’s portfolio of securities for sale to the public. The UIT sponsor also manages the portfolio by depositing the securities in a trust and sells units of the UIT in a public offering.
UITs typically offer investors breakpoints or sales charge discounts in order to reduce the sales fee charges on a UIT purchase. On March 31, 2004, FINRA issued Notice to Members 04-26, UIT Sales, which informed broker-dealers that they are required to develop and implement procedures to ensure customers receive available sales charge discounts for UITs. NTM 04-26 states that UIT transactions must be offered, “on the most advantageous terms available to the customer,” among other requirements. Here, FINRA alleged the aforementioned broker-dealers failed to identify and apply sales charge discounts to certain customers’ eligible purchases of UITs in violation of FINRA Rule 2010.
FINRA broker-dealers are also required to train, supervise and enforce policies and procedures regarding the products they sell, including UITs. Specifically, NASD Rule 3010(a) requires each member to establish and maintain a system of supervision that is reasonably designed to achieve compliance with applicable securities laws and regulations and with applicable NASD and FINRA Rules. Whereas, NASD Rule 3010(b), requires each member firm to “establish, maintain and enforce written procedures to supervise the types of business in which it engages and to supervise the activities of registered representatives, registered principles, and other associated persons that are reasonably designed to achieve compliance” with FINRA Rules.
Here, FINRA alleged that the firms’ failure to identify and apply the sales charge discounts demonstrated that the firms failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to ensure customers received sales charge discounts on all eligible UIT purchases. As a result, the broker-dealers faced public censure, massive fines, and in some instances, were order to pay restitution to the affected customers.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered investment damages investing in UITs through the above-referenced firms, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please complete the contact form or contact one of our attorneys at (800) 627-2179 to schedule a free consultation.