{"id":555,"date":"2009-08-12T17:51:43","date_gmt":"2009-08-12T17:51:43","guid":{"rendered":"https:\/\/www.stockbrokerfraudblog.com\/2009\/08\/ubs_ag_and_merrill_lynch_colle"},"modified":"2022-03-09T15:56:05","modified_gmt":"2022-03-09T21:56:05","slug":"ubs-ag-and-merrill-lynch-colle","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/ubs-ag-and-merrill-lynch-colle\/","title":{"rendered":"UBS AG and Merrill Lynch Collectively Fined $250,000 by FINRA for Closed-End Fund Actions"},"content":{"rendered":"

\t\t\t\tUBS Financial Services Inc.<\/a> has agreed to be fined $100,000 and Merrill Lynch, Pierce, Fenner & Smith Inc.<\/a> has consented to a $150,000 fine, says the Financial Industry Regulatory Authority, for alleged supervisory failures that resulted in the inappropriate short-term sales of closed-end funds<\/a> that were bought at initial public offerings for the funds. By agreeing to settle, the broker-dealers are not deny or admitting to the FINRA charges. They are, however, consenting to the findings.<\/p>\n

FINRA also announced that it was suspending five Merrill Lynch brokers for 15 days. Each of them must pay a $10,000 fine for allegedly making fund recommendations that were unsuitable for investors. <\/p>\n

Merrill Lynch brokers that FINRA has sanction include:<\/em><\/p>\n

\u2022\tKenneth C. Iwelumo (his clients lost about $563,000)
\n\u2022\tJoseph Miller (approximately $130,000 in client losses)
\n\u2022\tRonald Kemp (about $411,000 in customer losses)
\n\u2022\tMichael Kizman (about $210,000 in losses)
\n\u2022\tJohn Ong (about $350,000 in client losses)<\/p>\n

The investigation into the activities of a number of former UBS brokers is ongoing. <\/p>\n

Closed-End Funds <\/strong>
\nClosed-End Funds are investment companies that sell a fixed number of shares during an initial public offering. These sales come with built-in sales charges. The CEF’s at issue came with a 4.5% sales charges and a 30-90 day penalty bid period after the IPO. If a client sold the CEF that had been purchased at the IPO during this time period, the broker would lose the commission. <\/p>\n

FINRA says that both broker-dealers knew that CEF’s bought at IPO’s are more appropriate for long-term investments and that because of the sales charges that come with their purchases, it is inappropriate to engage in the short-term trading of CEF’s. FINRA claims that Merrill Lynch and UBS did not have the proper supervisory procedures and systems in place so that brokers couldn’t and\/or wouldn’t make such unsuitable CEF sales. <\/p>\n

FINRA also says that both broker-dealers failed to warn supervisors about the potential issues that could result from such activity and did not properly train registered individuals. Due to this improper supervision, brokers for Merrill and UBS recommended that certain clients engage in short-term sales of CEF’s bought at IPOs without fully understanding the financial ramifications these recommendations would have on their clients’ finances. <\/p>\n

FINRA is concerned about brokers who convince customers to buy CEF’s during their IPO’s and then wait until after the penalty bid period is over to recommend that clients sell the CEF’s-usually at a loss. These brokers then recommend that clients use the proceeds from the sale to purchase more CEF’s at initial public offerings.<\/p>\n

FINRA Fines Merrill Lynch, UBS for Supervisory Failures in Sales of Closed-End Funds; Customers Get More Than $5 Million in Remediation, FINRA, July 28, 2009
\nMerrill, UBS Are Fined in Closed-End-Fund Case<\/a>, The Wall Street Journal, July 29, 2009 Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

UBS Financial Services Inc. has agreed to be fined $100,000 and Merrill Lynch, Pierce, Fenner & Smith Inc. has consented to a $150,000 fine, says the Financial Industry Regulatory Authority, for alleged supervisory failures that resulted in the inappropriate short-term sales of closed-end funds that were bought at initial public offerings for the funds. By […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3773,3774,3752,3800,3755],"tags":[],"class_list":["post-555","post","type-post","status-publish","format-standard","hentry","category-broker-fraud","category-broker-dealers","category-financial-firms","category-merrill-lynch","category-ubs"],"yoast_head":"\nUBS AG and Merrill Lynch Collectively Fined $250,000 by FINRA for Closed-End Fund Actions — Investor Lawyers Blog — August 12, 2009<\/title>\n<meta name=\"description\" content=\"UBS Financial Services Inc. has agreed to be fined $100,000 and Merrill Lynch, Pierce, Fenner & Smith Inc. has consented to a $150,000 fine, says the — August 12, 2009\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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