FINRA’s Department of Enforcement investigated Witter’s alleged misconduct and found he failed to appropriately supervise the sales practices of one of his registered representative’s who almost exclusively recommended unit investment trusts (UITs) to his customers. In 2011, Royal Alliance filed a Form U5 reporting the registered representative’s voluntary termination from the firm and disclosing that it was conducting an internal review of the employee for exchanging UITs before maturity, making misrepresentations regarding UITs to customers, and failing to deliver UIT prospectuses.
According to FINRA, Witter missed and/or ignored numerous “red flags” in connection with the registered representative’s recommendations of UIT investment to his customers. For example, the registered representative engaged in a pattern of unsuitable short-term trading of UITs, including the sale of UITs before their maturity dates, which resulted in high turnover rates and cost-to-equity ratios in customer accounts. The registered representative also switched between UITs and other securities with similar investment objectives and designated a disproportionate number of UIT transactions as “unsolicited” in Royal Alliance’s order entry system.
Based upon the foregoing misconduct, FINRA alleged Witter violated financial industry rules and regulations, including NASD Rules 3010(a) and FINRA Rule 2010. Specifically, under NASD Rule 3010, a brokerage firm owes a duty to all of its clients to monitor and supervise its employees properly. The rule states: “[e]ach member shall establish and maintain a system to supervise the activities of each registered representative…that is reasonably designed to achieve compliance with applicable securities laws and regulations…”
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 damage investing in UITs while holding an account with Royal Alliance, you may be eligible to participate in a FINRA arbitration proceeding to recoup your losses. Please complete our contact form below or contact one of our attorneys at (800) 627-2179.