FINRA recently ordered three firms to pay fines and restitution for failing
to give some of their clients eligible discounts on purchases of unit
Brokerage firms need to be vigilant in giving their clients eligible discounts
for large investment purchases, according to the Financial Industry Regulatory
Authority. FINRA recently ordered three firms - Next Financial Group,
Key Investment Services, and Stephens Inc. - to pay $1.2 million in fines
and restitution for this type of misconduct in connection with sales of
unit investment trusts (UITs).
What is a UIT?
UITs are pre-selected baskets of stocks or bonds, fixed for a predetermined
time, and often packaged with an interesting investment strategy in order
to meet specified goals. At Meyer Wilson, we believe that UITs are often
a poor substitute for ordinary mutual funds. You can read more about UITs
Attorney David Meyer’s helpful video here.
The discounts that FINRA is specifically monitoring are often referred
to in the investment industry as “breakpoint discounts.” Back
in October of last year, FINRA ordered 12 firms to pay $6.7 million in
fines and restitution over similar discount and