Summit Brokerage Services, Inc. (Summit) of Boca Raton, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement for the Financial Industry Regulatory Authority (FINRA) for allegedly failing to apply sales-charge discounts to certain customers’ eligible purchases of unit investment trusts (UITs) and for failing to establish, maintain, and enforce a proper supervisory system. Summit faced a similar FINRA disciplinary action in 2015 with regard to its supervision of non-traditional exchange-traded funds (ETFs).
FINRA investigators alleged that Summit failed to apply sales charge discounts to certain customers’ eligible purchases of UITs. FINRA found that Summit failed to apply sales-charge discounts to 362 eligible UIT purchases resulting in customers paying excessive sales charges of approximately $62,236.26. FINRA also alleged that Summit failed to establish, maintain, and enforce a supervisory system and written supervisory procedures (WSPs) reasonably designed to ensure that customers received sales-charge discounts to which they were entitled on UIT purchases. Summit’s WSPs did not even contain provisions specific to UIT discounts.
This type of alleged conduct is discussed in FINRA’s Notice to Members (NTM) 04-26, which reminds broker-dealers to develop and implement procedures to ensure customers receive all available sales charge discounts for UITs. FINRA NTM 04-26 goes on to state that UIT transactions must take place “on the most advantageous terms available to the customer” and that it is the firm’s responsibility to “take appropriate steps to ensure that they and their employees understand … and apply correctly any applicable price breaks available to customers in connection with UITs.”
Without admitting or denying FINRA’s findings, Summit Brokerage Services was censured, fined $75,000 and required to pay restitution of $83,757.49, plus interest, to the affected customers.
FINRA rules require brokerage firms to establish and implement a reasonable supervisory system to protect customers from the risks associated with investing. 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 the unsuitable recommendations of its representatives can bring forth claims to recover damages against firms, like Summit Brokerage Services, which have a duty to supervise employees in order to protect their customers’ interests.
Have you suffered losses in your Summit Brokerage Services 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 Summit Brokerage Services 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 40 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 firstname.lastname@example.org for answers to any of your questions about this blog post and/or any related matter.