FINRA has ordered Chase Investment Services Corporation to reimburse customers
almost $2 million for losses related to the company's recommendation
of certain unit investment trusts (UITs) and floating rate funds, according
to a Nov. 15 news release.
UITs are highly speculative products that can contain a significant percentage
of high-yield or junk bonds. Floating rate funds are often illiquid products
that invest in loans made to below-investment-grade entities. These characteristics
make both UITs and floating rate funds risky, complicated products suitable
only for experienced, knowledgeable investors who can afford to take the risk.
Despite this, a FINRA investigation found that Chase brokers made almost
260 recommendations of the products to some of their unsophisticated and
inexperienced customers whose "conservative" risk tolerance,
liquidity needs, and/or desire for principal protection made the products
unsuitable for them. Customer losses stemming from the recommendations totaled approximately
$1.4 million for the unsuitable UITs and nearly $500,000 for the unsuitable
floating rate funds.
FINRA also charged Chase with failing to properly supervise the sale of
the products. Chase neither admitted nor denied FINRA's charges, but
did consent to entry of the findings. For more information, read the full
FINRA news release