Published on:

Investors Capital Corp. Fined for Failing to Apply Sales-Charge Discounts to UIT Customers

Investors Capital Corporation (Investors Capital) of Lynnfield, Massachusetts, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for allegedly failing to apply sales-charge discounts to certain customers’ eligible purchases of unit investment trusts and for failing to establish, maintain, and enforce a proper supervisory system with respect to certain registered representatives’ unsuitable recommendations of unit investment trusts (UITs).

FINRA found that Investors Capital, through some of its registered representatives, recommended unsuitable short-term trading of UITs without reasonable grounds for believing the recommendations were suitable for customers, resulting in customer losses of approximately $242,892.  FINRA also found that Investors Capital failed to apply sales charge discounts to approximately 1,995 customers’ purchases of UITs, resulting in excessive sales charges of $472,876.  The firm’s supervisory system allegedly failed to ensure the customers received appropriate sales charge discounts, relying solely on its representatives to ensure customers received the discounts.  Without admitting or denying FINRA’s findings, Investors Capital was censured, fined $250,000 and required to pay restitution of $841,532.97 to the affected customers.    

FINRA rules require brokerage firms to establish and implement a reasonable supervisory system to protect customers from risks associated with industry misconduct. The implementation of the rules requires supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker-dealers and their supervisors fail to establish and implement these protective measures, they may be held liable to account holders for investment losses which stem from their employees’ misconduct. Therefore, investors who have suffered losses due to a brokerage firm’s failure to supervise its representatives can bring forth claims to recover damages against firms, like Investors Capital Corp., which have a duty to supervise its employees in order to protect their customers’ interests.

Have you suffered losses in your Investors Capital Corp. account?  Do you feel that your stockbroker may have failed to inform you of and/or apply sales-charge discounts? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Investors Capital Corp. stockbrokers who may have engaged in misconduct and caused investors losses.

The most important of investors’ rights is the right to be informed!  This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida.  For over 35 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues.  The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally!  Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.