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Oppenheimer to pay $4.7m fine over early UIT rollovers

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Christian Fernsby ▼ | December 31, 2019
FINRA announced that it has ordered Oppenheimer to pay more than $3.8 million in restitution to customers who incurred potentially excessive sales charges caused by early rollovers of Unit Investment Trusts (UITs).
Oppenheimer
American business   Oppenheimer
FINRA also fined the firm $800,000 for failing to reasonably supervise early UIT rollovers.

Topics: Oppenheimer fine

A UIT is an investment company that offers investors shares, or “units,” in a fixed portfolio of securities in a one-time public offering that terminates on a specific maturity date, often after 15 or 24 months.

As a result, UITs are generally intended as long-term investments and have sales charges based on their long-term nature, including an initial and deferred sales charge and a creation and development fee. 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.

From January 2011 through December 2015, Oppenheimer executed more than $6.4 billion in UIT transactions $753.9 million of which were early rollovers. However, FINRA found the firm’s WSPs and supervisory system which did not involve the use of automated reports or alerts were not reasonably designed to supervise the suitability of those early rollovers.

As a result, Oppenheimer did not identify that its representatives recommended potentially unsuitable early rollovers that, collectively, may have caused customers to incur more than $3.8 million in sales charges that they would not have incurred had they held the UITs until their maturity dates.


 

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