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Brokerage Firms on the Hook for Missed Breakpoint Discounts

FINRA recently ordered three firms to pay fines and restitution for failing to give some of their clients eligible discounts on purchases of unit investment trusts. 

Brokerage firms need to be vigilant in giving their clients eligible discounts for large investment purchases, according to the Financial Industry Regulatory Authority. FINRA recently ordered three firms - Next Financial Group, Key Investment Services, and Stephens Inc. - to pay $1.2 million in fines and restitution for this type of misconduct in connection with sales of unit investment trusts (UITs).

What is a UIT?

UITs are pre-selected baskets of stocks or bonds, fixed for a predetermined time, and often packaged with an interesting investment strategy in order to meet specified goals. At Meyer Wilson, we believe that UITs are often a poor substitute for ordinary mutual funds. You can read more about UITs and watch Attorney David Meyer’s helpful video here.

Breakpoint Discounts

The discounts that FINRA is specifically monitoring are often referred to in the investment industry as “breakpoint discounts.” Back in October of last year, FINRA ordered 12 firms to pay $6.7 million in fines and restitution over similar discount and supervisory failures.

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

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