FINRA Says SagePoint Financial Brokers Unsuitably Recommended Early UIT Rollovers
The Financial Industry Regulatory Authority (FINRA) is ordering SagePoint Financial to pay over $1.6M in fines and restitution after it executed over $895 million in unit investment trust (UIT) transactions that resulted in more than $17.2 million in sales charges.
Of these UIT transactions, over $203.7 million of the proceeds were from sales that occurred over 100 days before a UIT’s maturity date. FINRA found that these unsuitable early rollovers caused customers to pay over $1.3 million in sales charges that they wouldn’t have otherwise if only they’d held onto their UITs until they matured.
Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) has been investigating SagePoint brokers over different types of fraud and negligence allegations made by the firm’s customers, including those involving these premature UIT rollovers.
Contact one of our UIT fraud attorneys today so that we can help you explore your legal options. SagePoint Financial is an Advisor Group broker-dealer.
UIT Investments Are Illiquid, Risky and Not for Conservative Investors
A unit investment trust (UIT) offers a fixed portfolio or redeemable units for a set period–usually at 15 to 24 months–upon which time this investment reaches its maturity date. UIT investors usually make money through capital appreciation and dividends. Also, upon maturity, securities in the UIT are bought back from the investor, who then stands to make a profit.
Unfortunately, according to FINRA, due to SagePoint’s inadequate supervisory procedures, the broker-dealer failed to properly oversee its registered representatives to make sure that the unit investment trust recommendations they were making to customers, including early rollovers, were suitable for them.
In addition to the early rollover fees, UIT investors at SagePoint Financial also may have sustained losses related to this type of investment’s illiquidity and usually accompanying high fees. UIT investments are not for every investor and may not be suitable for portfolios that require low or no risk. SagePoint brokers have a duty to properly apprise customers of risks involved when making an investment recommendation.
SagePoint Financial consented to FINRA’s sanctions but without denying or admitting to the self-regulatory organization (SRO’s) findings. Of the $1.6 million, $1.3 million will go in restitution to customers that were affected and $300,000 is a fine.
Stifel Nicholaus, Oppenheimer Also Were Sanctioned for Early UIT Rollovers
SagePoint is not the only firm recently sanctioned by FINRA over early UIT rollovers. Last month, Stifel Nicholaus agreed to pay $3.6 million for early UIT rollovers initiated between 2012 and 2016 that impacted over 1700 customers and may have cost them about $1.9 million in sales charges that could have been avoided.
In December, Oppenheimer (OPY) was fined $3.78 million in restitution and an $800,000 fine also over early unit investment trust rollovers and alleged related supervisory failures that may have cost investors over $3.8 million in sales charges.
Broker Fraud Law Firm Investigating SagePoint
SSEK Law Firm has been investigating SagePoint Financial and its brokers for some time now, including their sale of GPB private placement funds to customers. GPB Capital Holdings is accused of operating an over $1.5 billion Ponzi scam that has cost investors hundreds of millions of dollars even as SagePoint and other broker-dealers earned more than $160 million in commissions.
Our broker fraud attorneys are also looking into these early UIT rollover losses and investigating whether SagePoint Financial customers have grounds for filing an inadequate supervision claim against the firm for damages. Contact SSEK Law Firm today.