On May 28, 2020 FINRA announced that it has ordered Stifel, Nicolaus & Co., to pay approximately $1.9 million in restitution, plus interest, to more than 1,700 customers in connection with early rollovers of Unit Investment Trusts (UITs). FINRA also fined the firm $1.74 million for providing inaccurate information to customers related to rollover costs incurred, and for related supervisory violations. The Letter of Acceptance states that Stifel failed to establish and maintain a supervisory system and enforce written supervisory systems that were reasonably designed to achieve compliance with FINRA’s suitability rule regarding early rollovers of UITs.
A Unit Investment Trust (UIT) is an SEC-registered investment company that offers investors shares or units in a fixed portfolio of securities in a one-time public offering. A UIT’s maturity date is often 15 to 24 months at which point the underlying securities are sold and the resulting proceeds are paid to investors. UITs impose a variety of upfront sales charges. A registered representative who recommended the sale of a customer’s UIT before its maturity date and used the sale proceeds to purchase a new UIT would cause the customer to incur greater sales charges than if the customer had held the UIT until maturity. Because of the long-term nature of UITs, their structure, and their costs, short term trading of UITs may be unsuitable.
FINRA’s investigation found that from January 2012 through December 2016, Stifel executed approximately $10.9 billion in UIT transactions – $935.2 million of which were early rollovers. It was also uncovered that the firm’s supervisory system and procedures were not reasonably designed to supervise the suitability of those early rollovers. As a result, Stifel failed to identify that its representatives recommended potentially unsuitable early rollovers that, collectively, may have caused customers to incur approximately $1.9 million in sales charges that they would not have incurred had they held the UITs until their maturity date. Additionally, Stifel sent approximately 600 letters to customers that contained inaccurate information or were missing information about the costs incurred by customers in connection with early UIT rollovers or switches.
In settling this matter, Stifel neither admitted or denied the charges, but consented to the entry of FINRA’s findings.
If you have not hired an attorney and wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL 33324. By phone: 954.693.7577 or 800.718.1422.