Cetera’s stockbroker fined $ 1.1 million and restitution for selling mutual funds


Investors Capital Corp., a broker in the Cetera Financial Group network, will pay $ 1.1 million in fines and restitution for the sale of mutual funds, according to an agreement with the Financial Industry Regulatory Authority Inc.
Through certain advisers, Investors Capital recommended the unsuitable short-term trading of ITU and other complex financial products known as steepening notes in the accounts of 74 clients, according to the regulations. In addition, Investors Capital also did not apply sales charge discounts to certain clients’ ITU purchases, according to Finra.
Finra fined Investors Capital $ 250,000 and the company agreed to pay $ 842,000 in restitution. The company has already paid close to $ 224,500 in compensation to customers.
Investors Capital is in the process of closing and transferring 458 advisors to another Cetera company, Cetera Advisors. Last year, Investors Capital generated sales of $ 98.8 million.
“We are delighted to put this case behind Investors Capital, which comes at the right time as we continue to make strong progress towards our previously announced goal of completing an orderly liquidation and shutdown of this brokerage in the coming weeks. Said Joseph Kuo, a spokesperson for Cetera.
Over the past year, Finra has cracked down on brokerage firms for failing to give discounts to clients for large purchases of investment products, including UITs.
An ITU is a type of fund that is a mix of an actively managed fund and a fixed portfolio of income producing securities that are bought and held to maturity. ITUs typically issue redeemable securities, or “units”, such as a mutual fund, which means that the ITU will redeem an investor’s units, at the investor’s request, at their approximate net asset value, depending on the investor. the Securities and Exchange Commission.
An ITU will generally make a single public offering of a fixed and specific number of units, such as closed-end funds.
According to Finra, so-called steep notes are complex and structured products that allow investors to bet on the shape of the yield curve.
ITUs are generally designed as long-term investments, according to Finra.
From June 2010 to September 2015, two representatives of Investors Capital recommended “a number of unsuitable short-term ITU transactions on the accounts of several clients”, according to Finra. ITUs typically carry a large upfront selling charge of 2.5% to 3.5% of the purchase amount, according to Finra. From January 2009 to September 2015, the company failed to put in place an adequate monitoring system to ensure that its representatives make appropriate ITU recommendations and steepening notes to clients, according to Finra.
A 58-year-old Investors Capital client with a long-term growth target for the account bought and sold approximately 65 ITUs, almost all of which had two-year maturities, on his account over a two-year period and half. The average length of detention of ITUs was three months.

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