According to a Letter of Acceptance, Waiver, and Consent (“AWC”) with FINRA, FTB Advisors, Inc. consented to a public censure, a fine of $125,000, and restitution to customers of at least $139,000. The AWC related to FINRA’s claims that FTB Advisors failed to apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts (“UITs”).
FINRA further alleged that FTB Advisors failed to establish, maintain, and enforce a supervisory system and written supervisory procedures reasonably designed to ensure that customers received sales charge discounts on all eligible UIT purchases. FINRA determined that FTB’s conduct violated various FINRA rules.
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As explained by FINRA, a unit investment trust (“UIT”) is a type of Investment Company that issues securities, typically called “units,” representing undivided interests in a relatively fixed portfolio of securities. UITs are generally issued by a sponsor that assembles the UIT’s portfolio of securities, deposits the securities in a trust, and sells units of the UIT in a public offering. UIT units are redeemable securities that are issued for a specific term, and entitle an investor to receive his or her proportionate share of the UIT’s net assets on redemption or at termination.
UIT sponsors offer investors a variety of ways to reduce the sales fee charged on a UIT purchase. The two most common methods to reduce the fee are “breakpoints,” which allow investors to reduce the sales fee by increasing the size of their UIT investments, and discounts on “rollovers” and “exchanges.”
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