FINRA ordered Merrill Lynch to pay over $11 million in fines and restitution for supervisory failures related to early rollovers in unit investment trusts (UITs), which caused thousands of customers to incur potentially excessive sales charges. FINRA found that Merrill Lynch's supervisory procedures were written in a way that prevented the firm from identifying these early rollovers.
According to AWC #2017053437701, Merrill Lynch, due in part to a lack of written supervisory procedures, failed to detect when its brokers and representatives recommended that a customer sell or rollover a UIT prior to its maturity date. Investigators found that these recommendations may have been unsuitable due to the charging of of fees and sales charges caused by early sales of the product prior to maturity, and also because customer objectives, including risk tolerance levels and investment time horizons, may have been inconsistent with this more aggressive and early trading strategy.
In short, if an investor indicated a long-term time horizon preference for holding investments, it would follow that the investor would ordinarily prefer to hold a UIT or other product to its indicated maturity date; by breaking (selling) the UIT early, a broker might go against the investor's long-term preference as well as cause the customer to incur more fees for the early rollover or sale transaction.
FINRA also cited the firm for failing to detect these ongoing unsuitable recommendations, noting neither its automated reporting or manual review adequately identified these potentially harmful early rollover transactions, causing customers to pay unnecessary and excessive sales charges.
If you invested with Merrill Lynch or with a broker or financial adviser who unsuitably recommended you sell or rollover a UIT or other product prior to its maturity date, in contravention of your investment preferences, and this harmful activity has proven harmful to your investments or interests through the incurrence of excessive sales charges, fees, commissions, or otherwise, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.