Another settlement was announced this week from the Financial Industry Regulatory Authority (FINRA) and it carries a high price. SunTrust Investment Services, Inc. has been ordered to pay a total of $1.44 million, which includes restitution, commission disgorgement and fines. The settlement centers on the sale of short-term Unit Investment Trusts (UITs) and other investments.
A Full Review
The settlement requires that SunTrust review all their UIT purchases and ensure that certain customers receive remediation since, according to FINRA, those including the elderly and disabled, suffered "significant losses" in these investments. Specifically, two former SunTrust brokers and their supervisor from its Maryland Region are alleged by FINRA to have sold UITs, closed end funds and mutual funds that were unsuitable investments to the elderly and the disabled. The pattern of unsuitability involved margin transactions in which these customers are alleged not to have received maximum sales discounts.
Unsuitable Investments
The pattern also involved the unsuitable purchases and sales of these securities on margin within short periods of time and on the brokers' recommendation. These activities resulted in either "little or no [customer] benefit." In addition, the risks and costs of these investments were not disclosed to these customers.
Red Flags Ignored
As the Securities Lawyer Blog has noted in other FINRA investigations, SunTrust's systems and procedures for monitoring these transactions were found to be inadequate and red flags for these transactions were ignored.
Broker Actions Pending
Actions are pending against one of the brokers and the supervisor involved. The other broker has been permanently barred from the securities industry for his activities at SunTrust and subsequently at Merrill Lynch. These activities included a pattern of investment recommendations that were unsuitable, failures to inform customers of costs and fees of transactions, failure to provide applicable discounts and the transfer and use of customer funds to pay personal expenses while at Merrill Lynch.
Related Web Resources
For more information on UITs and other securities visit the Securities and Exchange Commission website.
Contact the lawyers at the Wall Street law firm of Gusrae Kaplan Nusbaum PLLC for more information on broker-dealer representation before FINRA and broker-dealer advisory services.
