The Financial Industry Regulatory Authority (FINRA) has ordered Oppenheimer & Co. Inc. to pay more than $3.8 million in restitution to customers who incurred “potentially excessive sales charges” caused by early rollovers of unit investment trusts (UITs). The securities regulator also fined the firm $800,000 for failing to reasonably supervise the early UIT rollovers.
According to FINRA, since UITs offer investors a stake in a fixed portfolio of securities that terminates on a specific maturity date, typically after 15 or 24 months, they are intended as long-term investments and have sales charges based on their long-term nature. Rolling over a UIT before its maturity date can result in increased sale charges over time, raising suitability concerns, FINRA added.
From January 2011 through December 2015, Oppenheimer executed more than $6.4 billion in UIT transactions, of which $753.9 million were early rollovers. FINRA found that the firm’s supervisory system did not involve the use of automated reports or alerts and was not reasonably designed to supervise the suitability of those early rollovers.