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FINRA fines Stifel, Nicolaus & Co for violations involving unit investment trusts

Maria Nikolova

Stifel, Nicolaus & Co will have to pay a fine of $1.75 million, as well as $1.9 million in restitution to over 1,700 customers in connection with early rollovers of Unit Investment Trusts.

The United States Financial Industry Regulatory Authority (FINRA) today announces that it has ordered Stifel, Nicolaus & Company, Incorporated to pay approximately $1.9 million in restitution, plus interest, to more than 1,700 customers in connection with early rollovers of Unit Investment Trusts (UITs). FINRA also fined the broker-dealer $1.75 million for providing inaccurate information to customers related to rollover costs incurred, and for related supervisory violations.

A registered representative who recommends that a customer sell his or her UIT position before the maturity date and then “rolls over” those funds into a new UIT causes the customer to incur increased sale charges over time, raising suitability concerns, FINRA explains.

From January 2012 through December 2016, Stifel executed approximately $10.9 billion in UIT transactions – $935.2 million of which were early rollovers. FINRA found the firm’s supervisory system and procedures were not reasonably designed to supervise the suitability of those early rollovers. Due to this, Stifel did not identify that its representatives recommended potentially unsuitable early rollovers that, collectively, may have caused customers to incur approximately $1.9 million in sales charges that they would not have incurred had they held the UITs until their maturity dates.

In addition, during the same time period, Stifel sent approximately 600 letters to customers that contained inaccurate information or were missing information about the costs incurred by customers in connection with early UIT rollovers or “switches.” On average those letters understated the costs to customers by approximately 49%.

This action resulted from a 2016 targeted examination with respect to UITs. Additionally, FINRA’s 2018 Regulatory and Examination Priorities Letter advised that FINRA would be reviewing firms’ supervisory controls related to UITs.

In settling this matter, Stifel neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

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