According to a recent announcement, the Financial Industry Regulatory Authority (FINRA) has penalized Morgan Stanley Smith Barney LLC approximately $13 million for failure to supervise its salespeople’s short-term trades of unit investment trusts. This $13 million includes a fine of $3.75 million and about $9.78 million in restitution to the more than 3,000 customers affected by the company’s actions.
A Unit Investment Trust (UIT) is a type of securities portfolio that automatically ends on a specific date of maturity — usually after 15 or 24 months. These trusts also feature a deferred sales charge and a “creation and development fee” typically set at 3.95 percent for a 24-month UIT. When the UIT rolls over, the customer pays the fees at least twice.
Morgan Stanley representatives executed hundreds of these UIT rollovers between January 2012 and June 2015. Thousands of customers saw their accounts roll over more than 100 days before they were fully mature. This meant the customers were forced to pay larger fees over time.
FINRA is the largest independent regulator for securities firms operating in the United States. Last year alone, the agency brought 1,434 disciplinary actions against registered firms and brokers, levying about $176.3 million in fines and ordering another $27.9 million in restitution to investors harmed due to wrongdoing.
For more information on the options available to you if you become aware of wrongdoing on the part of a major financial organization, speak with a knowledgeable Dallas attorney at Whistleblower Law for Managers.