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FINRA Fines Investors Capital for Alleged Unsuitable UIT Sales


Investors Capital will pay $1.1 million in fines and restitution over the sale of unit investment trusts (UITs) to resolve an investigation by the Financial Industry Regulatory Authority Inc. (FINRA).  FINRA alleges that certain Investors Capital brokers recommended unsuitable short-term trading of UITs and other complex financial products known as steepener notes in accounts of 74 clients, according to the settlement.

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old bird cage

Investors Capital also allegedly failed to apply sales charge discounts to certain customers’ purchases of UITs, and inadequately supervised its representatives, according to FINRA’s allegations. To resolve the FINRA case, Investors Capital agreed to pay $250,000 in fines and $842,000 in restitution. The firm has already reportedly paid close to $224,500 in restitution to clients.


A UIT is a type of fund that holds a fixed portfolio of income-producing securities that is purchased and held to maturity as a long-term investment.  UITs usually carry significant upfront sales charges of 2.5% to 3.5% of the purchase amount, according to FINRA.


When a broker recommends that a client purchase or sell a security, the broker must have a reasonable basis for believing that the recommendation is suitable for the investor.  Recommendations of short-term transactions in UITs would likely be unsuitable in many circumstances due in part to the high transaction costs imposed by the upfront sales charges carried by UITs.


If you believe you have been the victim of stockbroker misconduct, you may wish to consult an attorney to find out more about your legal rights and options.  Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or for a no-cost, confidential consultation.

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