The Financial Industry Regulatory Authority has ordered SagePoint Financial to pay $1.3 million in restitution, plus interest, to customers in connection with early rollovers of unit investment trusts. FINRA also fined the broker-dealer $300,000 for related supervisory violations.
SagePoint is part of the Advisor Group network of independent broker-dealers and has approximately 1,800 registered representatives and 815 branch offices.
FINRA alleges that SagePoint failed to establish and maintain a supervisory system and written procedures designed to supervise the suitability of representatives’ recommendations to customers for early rollovers of unit investment trusts.
A unit investment trust offers investors shares or “units” in a fixed portfolio of securities in a one-time public offering that terminates on a specified maturity date, often after 15 or 24 months.
UIT products can be offered in successive “series,” with the offering periods for new series coinciding with the maturity date of prior series. Successive series of UITs often have the same or similar investment objectives and strategies.
As an example, a typical 24-month UIT contains three separate charges: an initial sales charge of up to 1 percent, a deferred sales charge of up to 2.5 percent, and a creation and development fee of up to 0.5 percent.
FINRA said that a registered representative who recommends that a customer sell his or her UIT position before the maturity date and then “rolls over” those funds into a new UIT causes the customer to incur increased sale charges over time, raising suitability concerns.
From January 2013 through December 2017, FINRA claims that SagePoint executed more than $895 million in UIT transactions that generated more than $17.2 million in sales charges. Of this amount, $272.2 million were early rollovers or series-to-series early rollovers that incurred $1.3 million in additional sales charges for the customer.
SagePoint signed the AWC letter without admitting or denying FINRA’s allegations. The firm does not have any relevant disciplinary history with the Securities and Exchange Commission, any state securities regulators, FINRA, or any other self-regulatory organization.
Earlier this month, FINRA ordered broker-dealer Stifel, Nicolaus & Company to pay approximately $1.9 million in restitution to more than 1,700 customers in connection with early rollovers of UITs. FINRA also fined the firm $1.75 million for allegedly providing inaccurate information to customers related to incurred rollover costs and for supervisory violations.