FINRA Orders Merrill Lynch, Pierce, Fenner & Smith, Inc. to Pay $ 8.4 Million in Customer Restitution


The Financial Sector Regulator (FINRA) has issued investment fund return payment orders against Merrill Lynch, Pierce, Fenner & Smith, Inc. regarding unit investment fund rollovers ( ITU).

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According to FINRA, the company has to pay more than $ 8.4 million in damages to more than 3,000 customers who incurred excessive sales costs related to the first ITU renewals. The company was also fined $ 3.25 million for failing to responsibly oversee transactions.

FINRA defines an ITU as an investment company offering investors shares in a fixed portfolio of securities in a single public offering ending on a specific maturity date. A registered representative recommending that a client sell their UIT position before the due date and transfer the funds to a new UIT causes the client to incur increased selling costs over time.

According to FINRA, Merrill Lynch initiated more than $ 32 billion in ITU transactions between January 2011 and December 2015, including around $ 2.5 billion in which the ITUs were sold more than 100 days before their due date, and some or all of the proceeds were used to purchase one. or more ITUs.

“Customers often incur unnecessary costs when representatives recommend short-term sales of products that are intended to be long-term investments,” said Jessica Hopper, executive vice president and head of the Enforcement Department at FINRA. “FINRA member companies must put in place sufficient monitoring systems to identify these potentially inappropriate transactions. Providing compensation to aggrieved investors remains a top priority for FINRA. “

Authorities said Merrill Lynch did not admit or deny the accusations, but consented to the entry of FINRA’s findings.


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