The Financial Industry Regulatory Authority (FINRA) has ordered brokerage firm Oppenheimer & Co. to pay more than $3.8 million in compensation and a fine of $800,000 for supervisory failures relating to sales of unit investment trusts (UITs).
The beneficiaries are Oppenheimer customers who were victims of potentially excessive sales charges stemming from the early rollover of UITs.
FINRA explained that UITs offer investors a stake in a fixed portfolio of securities with specific maturity dates (often after 15-24 months). FINRA added that UIT’s are intended as long-term investments. Thus, rolling over a UIT before its maturity date can result in an unnecessary increase in sale charges over time, raising suitability concerns.
From January 2011 through December 2015, the firm allegedly executed over $6.4 billion in UIT transactions, of which approximately $753.9 million were early rollovers. Throughout the investigation, FINRA found put that Oppenheimer's supervisory system was not adequately designed to monitor those early rollovers.
Consequently, the firm was recommending potentially unsuitable early rollovers resulting in $3.8 million in excessive sales charges. According to FINRA, customers could have avoided these charges if Oppenheimer had they held the UITs until their maturity dates.
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