In addition, during the same time period, Finra said that Stifel sent approximately 600 letters to customers “that contained inaccurate information or were missing information about the costs incurred by customers in connection with early UIT rollovers or switches. On average, those letters understated the costs to customers by approximately 49%.”
Finra said the enforcement resulted from targeted examinations that began in 2016 and zeroed in on broker-dealers’ UIT early rollovers. At that time, Finra asked firms for their top 25 registered reps generating the highest UIT sales and early rollover numbers and revenue. Finra also asked firms to provide purchase and sales blotters and customer account lists for the top 10 reps conducting the greatest number of UIT early rollovers.
The regulator warned the industry again about UIT sales and rollovers in its 2018 regulatory examination priorities letter. “Finra will review firms’ handling of products where Finra has observed firms experiencing problems implementing effective controls, such as firms’ handling of [UITs] and multi-share-class products,” the agency said.
Firms were warned that examiners would be looking for “recommendations that result in undue concentration in securities positions, including recommendations resulting in concentrated positions in interest-rate-sensitive instruments or recommendations that result in short-term trading of products typically intended to be held on a long-term basis,” Finra said.