Finra continued to whack independent broker-dealers for failing to give clients discounts for large purchases of complex investment products, announcing Tuesday that it had ordered a dozen firms to pay restitution and fines totaling $6.7 million.
The IBDs were cited for failing to apply sales charge discounts to clients' purchases of unit investment trusts and related supervisory failures. They were fined a total of $2.6 million and ordered to pay restitution of $4 million.
A UIT typically issues redeemable securities, or "units," like a mutual fund, which means that the UIT will buy back an investor's units, at the investor's request, at their approximate net asset value, according to the Securities and Exchange Commission. A UIT typically will make a one-time public offering of only a specific, fixed number of units, like closed-end funds.
The Financial Industry Regulatory Authority Inc. has been watching whether firms are properly giving their clients discounts, commonly known in the securities industry as breakpoint discounts. Over the summer,
Finra fined six IBDs a total of more than $500,000 for failing to give clients appropriate discounts on large sales of nontraded real estate investment trusts and business development companies.
CUSTOMER HARM
"Firms need to ensure that their registered representatives are providing customers the sales charge discounts to which they are entitled,” said Brad Bennett, Finra's executive vice president and chief of enforcement,
in a statement. “The firms sanctioned today failed to provide these discounts, resulting in customer harm in the form of higher costs for which customers have been or will be reimbursed."
Finra ordered the restitution and fines against the following firms: First Allied Securities Inc., $689,647 in restitution and fined $325,000; Fifth Third Securities Inc., $663,534 in restitution and fined $300,000; Securities America Inc., $477,686 in restitution and fined $275,000; Cetera Advisors, $452,622 in restitution and fined $250,000; Park Avenue Securities, $443,255 in restitution and fined $300,000; and Commonwealth Financial Network, $357,521 in restitution and fined $225,000;
It also ordered restitution and fines against these firms: MetLife Securities Inc., $349,748 in restitution and fined $300,000; Comerica Securities, $197,757 in restitution and fined $150,000; Cetera Advisor Networks, $151,108 in restitution and fined $150,000; Ameritas Investment Corp., $128,544 in restitution and fined $150,000; Infinex Investments Inc., $109,627 in restitution and fined $150,000; and The Huntington Investment Company, $60,973 in restitution and fined $75,000.
“Upon discovering this issue, Commonwealth proactively revised the applicable supervisory systems and procedures for UIT rollover and exchange purchases,” wrote spokeswoman Jacquelyn Marchand, in an email to
InvestmentNews. “We have also reimbursed all affected customers for missing discounts, plus interest.”
Park Avenue Securities spokeswoman Jeanette Volpi said: “Park Avenue Securities thoroughly cooperated with Finra and all affected customers have been fully reimbursed.”
“MetLife Securities thoroughly cooperated with Finra and has fully reimbursed impacted clients,” wrote Meghan Lantier, a company spokeswoman, in an email.
Spokespeople and executives from the other firms fined by Finra did not immediately return calls to comment. Eleven failed to give the appropriate discounts for UITs from 2009 to 2014, according to the Finra orders. Park Avenue Securities failed to give clients proper discounts from 2009 to 2013.
