Three Brokerage Firms Hit with $1.2 Million in Fines and Restitution for UITs

FINRA is continuing to crack down on brokerage firms that fail to give their clients discounts for large purchases of investment products. Three firms, Next Financial Group Inc., Key Investment Services, and Stephens Inc., were charged with failing to apply sales charge discounts to customers’ eligible purchases of unit investment trusts (UITs).

A UIT is a type of investment that blends a fixed portfolio of securities with an actively managed fund that is purchased and held to maturity. UITs generally issue redeemable securities known as “units,” like a mutual fund, and the trust will buy back an investor’s units at their approximate net value.

Next Financial was fined $125,000 and ordered to pay restitution of a further $216,000; Key Investment Services was fined $100,000 and ordered to pay restitution of another $100,000; and Stephens was fined $235,000 and an additional $459,000 in restitution. According to their settlements with FINRA, Next and Key failed to give discounts between May 2009 and April 2014, while Stephens failed to give discounts from June 2010 to May 2015.

These discounts are commonly referred to as “breakpoint discounts” in the securities industry. This past October, FINRA fined firms a total of $6.7 million for failing to apply breakpoint discounts to clients’ purchases of UITs.

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