A broker-dealer settled FINRA charges for failing to maintain a supervisory system reasonably designed to ensure that its representatives were not recommending unsuitable short-term transactions in Unit Investment Trusts ("UITs").
In a Letter of Acceptance, Waiver, and Consent, FINRA determined that although one of the broker-dealer's market surveillance and monitoring specialists circulated guidance as to the appropriate UIT hold periods for clients, its supervisory system did not include any reports that would have identified (i) whether a representative had recommended a rollover of a UIT earlier than the recommended period or (ii) patterns of early rollovers. FINRA also found that the broker-dealer failed to identify thousands of instances in which its representatives provided unsuitable rollover recommendations.
As a result of its findings, FINRA determined that the broker-dealer violated NASD Rule 3010 and FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade") and 3110 ("Supervision").
To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a $3.25 million fine and (iii) payment of $8,437,223.38, plus interest, in restitution to the customers impacted by the conduct.
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