FINRA fined Cambridge Investment Research $200,000 for failing to adequately supervise sales of unit investment trusts (UITs), resulting in the accrual of $389,200 in excessive and unnecessary fees and costs for Cambridge UIT customers.
According to FINRA's report, Cambridge failed to supervise a registered representative who repeatedly recommended customers sell their UIT positions before maturity, often rolling the proceeds into new UIT positions. Redeeming a UIT prior to maturity can result in financial damages related to the early redemption when customers forgo their ability to recoup up-front sales charges, especially when proceeds are rolled into new UITs, which generate their own up-front sales charges and fees.
In total, 184 customers reportedly paid at least $389,200 in additional fees and charges they otherwise would not have paid had they simply held their UIT positions to maturity.
Investigators found that although Cambridge's written supervisory procedures stated that UITs should not be utilized for short-term trading specifically because of the increased costs and charges, the firm nonetheless failed to appropriately respond to red flags associated with the unsuitable early redemption recommendations.
In 2020, FINRA fined Cambridge Investment Research $150,000 over supervisory failures also related to short-term UIT trading, specifically related to failure to apply appropriate discounts in sales of mutual fund Class A shares.
If you invested with a broker at Cambridge Investment Research or another FINRA-member brokerage firm who unsuitably recommended early UIT redemptions prior to maturity or other excessive trades that resulted in additional and unnecessary fees, sales charges, commissions, or other investment losses, 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.