FINRA Orders Brokerage Firms to Pay $16.8 Million in Restitution to 10,000 Investors for UIT Rollovers

FINRA Sanctions Brokerage Firms For UIT Rollovers

Did your broker execute unsuitable short-term trading strategies? It is alleged that brokers across the country excessively traded unit investment trusts (UITs), which are investments that are meant to be held long term.

According to FINRA, the regulatory agency reached settlements with Wells Fargo Advisors, Wells Fargo Clearing Services, Wells’ independent Financial Network, Merrill Lynch, Stifel Nicolaus & Co., Cambridge Investment Research, and Oppenheimer & Co. and obtained more than $16.8 million in restitution to 10,000 investors, as well as $6.6 million in fines, regarding the brokerage firms failure to reasonably supervise early rollovers of UITs, which caused customers to incur potentially excessive sales charges.

FINRA Sanctions Brokerage Firms For UIT Rollovers

The sanctions included:

  • Two Wells Fargo Advisors broker-dealers were ordered to pay $3.1 million in fines and restitution regarding excessive trading of UITs.
  • The sanctions against Wells Fargo Clearing Services broker-dealer and Wells’ independent Financial Network unit included almost $2.5 million in restitution and $650,000 in fines.
  • Merrill Lynch was sanctioned to pay $11.65 million in fines and restitution.
  • Stifel Nicolaus & Co., Cambridge Investment Research, and Oppenheimer & Co. were also sanctioned.

FINRA began its sweep in 2016 after finding that brokers at Morgan Stanley Wealth Management had made thousands of improper rollovers.

According to FINRA, “A UIT is a form of investment company that offers investors shares, or “units,” in a fixed portfolio of securities in a one-time public offering that terminates on a specified maturity date, often after 15 or 24 months. UITs are generally intended as long-term investments and have sales charges based on their long-term nature, including deferred sales charges, and a creation and development fee. A registered representative who recommends that a customer sell his or her UIT position before the maturity date and then “roll over” those funds into a new UIT causes the customer to incur greater sales charges than if the customer had held the UIT until maturity, raising suitability concerns.” Typically, UITs carry sales charges of 3.95% and are designed to be held for periods of 15 to 24 months. However, early rollovers into a new UIT could incur additional sales charges of 2.95% and repeated rollovers could generate as much as 12.8% in commissions over a two-year period.

Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Wells Fargo Advisors, Wells Fargo Clearing Services, Wells’ independent Financial Network, Merrill Lynch, Stifel Nicolaus & Co., Cambridge Investment Research, and Oppenheimer & Co. may be liable for investment or other losses suffered by its customers.

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.