FINRA reaches agreement with investment firms on ITU renewal issues


The Financial Sector Regulatory Authority (FINRA) has reached agreements with six member investment firms to pay a refund to clients on advance refinancing of Unit Investment Trusts (ITUs).

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Not all companies reasonably supervised ITU’s early renewals, resulting in potentially excessive selling costs for customers. Through the settlements, FINRA obtained more than $ 16.8 million in restitution from approximately 10,000 investors.

An ITU is a form of investment company that offers investors shares, or “units”, in a fixed portfolio of securities as part of a single public offering. The single public offering ends on a specified expiry date, often after 15 or 24 months. ITUs are generally designed as long-term investments. They have selling costs based on their long-term nature, including deferred selling costs, as well as creation and development costs.

A registered representative who recommends that a client sell their ITU position before the expiry date and then “carry over” those funds to a new ITU incurs a higher selling charge on the client than if they had held the ITU. until maturity.

FINRA and other regulators conduct targeted reviews, or scans, to gather information on issues of concern to the industry and investors. FINRA launched the scan for ITU’s first renewals after finding that a member company failed to reasonably oversee ITU’s first renewals in thousands of customer accounts. The company accepted a settlement requiring it to pay $ 9.8 million in restitution and a fine of $ 3.25 million. FINRA also identified similar oversight failures at six other companies, all of which agreed to regulations requiring companies to pay a total of $ 16.8 million in restitution and $ 6.6 million in fines.

“This multi-year effort reflects FINRA’s commitment to proactively identify issues and compensate aggrieved investors. These cases should serve as a clear reminder to member companies to ensure that their surveillance systems are reasonably designed to oversee the sales of all the products they offer. Companies should be especially vigilant in identifying representatives who recommend trading strategies designed to generate commission for the representative regardless of the intended use of the product, ”said Jessica Hopper, executive vice president and head of the sales department. the application of FINRA.


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