Next Financial Group Inc., Key Investment Services and Stephens Inc. Blasted by FINRA for UIT Sales: What This Means for Investors

The Financial Industry Regulatory Authority (FINRA) cracked down on Next Financial, Key Investment and Stephens for failing to give clients discounts for large purchases of investment products. The three firms were ordered to pay $1.2 million in fines and restitution. They were charged with failing to apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts (UITs) and related supervisory failures, according to the settlements. A UIT is an exchange-traded mutual fund offering a fixed portfolio of securities having a definite life. Each unit typically costs $1,000 and is sold to investors by brokers. They can be resold in the secondary market. They are held to maturity and typically issue redeemable securities or “units,” which means the UIT will buy back an investor’s units at the investor’s request, at their approximate net asset value, according to the Securities and Exchange Commission (SEC). Next Financial was fined $125,000 and ordered to pay restitution of $216,000, Key Investment Services was fined $100,000 and Stephens was fined $235,000 and ordered to pay restitution of $459,000. Next Financial and Key Investment Services failed to give discounts from June May 2009 to April 2014 and Stephens failed to give discounts from June 2010 to May 2015. In October, FINRA ordered 12 firms to pay restitution and fines of $6.7 million for failing to apply sales charge discounts on purchases of UITs and other supervisory related failures, and also fined six broker-dealers for failing to give discounts on large real estate investment trust (REIT) sales.

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