What You Need to Know
- Merrill was ordered to pay more than $8.4 million in restitution to more than 3,000 clients.
- The clients had incurred potentially excessive sales charges related to unit investment trusts (UITs).
- FINRA also fined the firm $3.25 million for failing to reasonably supervise early UIT rollovers.
Merrill Lynch has been ordered by the Financial Industry Regulatory Authority to pay more than $8.4 million in restitution to more than 3,000 clients who incurred potentially excessive sales charges related to early rollovers of unit investment trusts (UITs), according to FINRA.
FINRA also fined the firm $3.25 million for failing to reasonably supervise early UIT rollovers, FINRA said Friday.
Merrill neither admitted nor denied the charges but consented to the entry of FINRA’s findings. Merrill signed a FINRA letter of acceptance, waiver and consent on June 4. FINRA signed it Friday.
“We entered into a settlement to resolve concerns about early rollovers of certain Unit Investment Trusts between 2011 and 2015,” Merrill said in a statement provided to ThinkAdvisor. “We have addressed these concerns through enhancements to our supervisory system.”
A UIT is an investment company offering investors shares, or “units,” in a fixed portfolio of securities in a one-time public offering that ends on a specific maturity date, typically after 15 or 24 months. Therefore, 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,” FINRA explained.
A registered representative who recommends that a client sell his or her UIT position before the maturity date and then “rolls over” those funds into a new UIT causes that client to incur increased sales charges over time, raising suitability concerns, according to FINRA.