FINRA sanctioned former Morgan Stanley and LPL Financial broker Ron Ray Willoughby aka Ronald Willoughby, presently with Kestra Investment Services in Venice, California, for engaging in short-term trading of Unit Investment Trusts (UITs) that investigators wrote was unsuitable for Willoughby's customers, and caused them to incur unnecessary sales charges and fees.
In some cases, FINRA wrote, Willoughby recommended his customers roll over UITs prior to maturity, just to use the proceeds to purchase "what was, essentially, the same investment."
According to AWC #2017055692301, Willoughby (CRD #2425926) engaged in an unsuitable pattern of early UIT rollovers by recommending his customers roll over UITs more than 100 days prior to maturity on more than 900 occasions, thus exposing customers to unnecessary sales charges.
In explaining UIT sales charges, investigators wrote that if a hypothetical customer purchased a 24-month UIT only to roll over the UIT into a new UIT six months later, that customer would have incurred additional sales charges that, if repeated every six months, would have accumulated to the tune of 12.8% over a two-year period. Had the customer simply held the originally UIT until maturity, this same customer would have paid a sales charge of just 3.95%.
FINRA wrote that of the 900+ early UIT rollovers recommended by stockbroker Willoughby, at least 100 pertained to a UIT rollover in order to purchase a subsequent series of the same UIT in what is known as a "series-to-series" rollover, and which generally had the same or similar investment objectives as the prior series.
FINRA noted that one such series-to-series UIT rollover involved a customer whose investment objective was "capital appreciation" and pertained to a strategy of investing in stocks derived from the "S&P 500 Dividend Aristocrats Index." The report states that Willoughby recommended his customer sell the 24-month UIT after holding it for 11 months—less than half of its term—and use the proceeds to purchase a later series of the same UIT, causing his customer to incur increased sales charges, only to invest in a strikingly similar product of the same UIT series.
Investigators concluded that Willoughby's unsuitable recommendations caused his customers to incur unnecessary sales charges, additionally finding that, at the time, Morgan Stanley's policies and procedures allowed these specific UIT rollovers to occur without supervisory review and approval; FINRA notes that the firm has since adopted a policy to treat these UIT rollovers as switches requiring supervision.
A recent customer dispute in Willoughby's BrokerCheck file alleging unsuitable investments was settled for $33,000, while a 2008 dispute, settled by Morgan Stanley for $87,500, had alleged that Willoughby purchased volatile securities even as his customers requested conservative investments for their retirement, resulting in unspecified damages.
If you have invested with current Kestra Investment Services (Venice, CA) broker Ronald Ray Willoughby, formerly of Morgan Stanley and LPL Financial in Tempe, Arizona, or with any stockbroker or financial adviser who has unsuitably recommended that you rollover a UIT prior to maturity or otherwise excessively trade or transact a product prior to maturity, thus causing you to incur sales charges, fees, or suffer losses, please call our experienced FINRA arbitration attorneys at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.