Cetera Investment Services, L.L.C. consented to a public censure, a FINRA fine, and customer restitution following FINRA’s allegations that Cetera failed to apply volume discounts to certain customers’ eligible purchases of non-traded real estate investment trusts (“REITs”) and business development companies (“BDCs”). FINRA also alleged that Cetera failed to have in place an adequate supervisory system and written supervisory procedures.
FINRA specifically alleged that from April 1, 2009 through April 30, 2014, Cetera failed to identify and apply volume discounts to ten eligible purchases of non-traded REITs and BDCs, resulting in customers failing to receive the benefit of approximately $18,000 of available sales charge discounts, as detailed in the Letter of Acceptance, Waiver and Consent (“AWC”) between Cetera and FINRA. FINRA further found that Cetera failed to establish, maintain, and enforce an adequate supervisory system and written supervisory procedures with respect to the sale of non-traded REITs and BDCs and that Cetera did not have procedures in place reasonably designed to identify accounts that would be eligible for volume discounts, according to the AWC.
Cetera consented to a public censure, a $30,000 fine, and restitution of $17,883.66, plus interest.
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As explained by FINRA, a REIT is a corporation, trust, or association that owns or manages income-producing real estate. There are two types of REITs: those that trade on a national securities exchange and those that do not. REITs in this latter category are generally referred to as publicly registered non-exchange traded, or simply, non-traded REITs.
A BDC is a closed-end investment company that invests in private or thinly traded public companies. As with non-traded REITs, non-traded BDCs are not traded on a national securities exchange.
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