Stifel Nicolaus & Co. Inc. Sanctioned for Regulatory Violations

FINRA Hits Stifel with more than $3.6 million in sanctions for sales of UITs

According to the Financial Industry Regulatory Authority Inc. (FINRA) on May 27, the regulator ordered Stifel to pay close to $1.9 million in restitution to about 1,700 customers for failing to supervise recommendations to roll over their UITs before they matured. FINRA says that the transactions were potentially unsuitable and allegedly caused the customers to incur sales charges they wouldn’t have had to pay had they held onto the investments for the full term.

From January 2012 through December 2016, Stifel purportedly executed about $10.9 billion in UIT transactions, of which about $935.2 million were rollovers occurring more than 100 days from their maturity date. FINRA alleges that Stifel also sent about 600 letters to customers purportedly misleading them about the costs of UIT rollovers, or “switches.” Those communications understated the cost of the switch by close to 49%, according to the Letter of Acceptance Waiver and Consent (AWC).

A Unit Investment Trust (UIT) is a type of Investment Company that offers redeemable units in a diversified portfolio of securities. The portfolio is generally made up of stocks and bonds or a combination of both, and is held for a specific length of time.

A UIT will have a specific termination date at which time the portfolio is liquidated and the proceeds are paid to investors. The length of time a UIT is held can range from one year to more than fifty years from the date of inception. However, investors can usually sell their units at any time. Most UIT’s will buy back units and resell the units to new investors.

Often clients are encouraged to reinvest or roll over their units at termination. Each time you reinvest you will get hit with the sales charge and other fees. In addition you will likely incur a capital gains tax when the UIT matures.

Free Consultation with a Securities Attorney

If you are concerned about your investments in Unit Investment Trusts (UITs), the securities attorneys at The White Law Group may be able to help you. Please call the offices at (888)637-5510 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.

For more information on The White Law Group, please visit our website at www.whitesecuritieslaw.com.