Financial Industry Regulatory Authority (FINRA) has ordered Georgia-based SunTrust Investment Services to pay $1.44m to resolve charges related to unsuitable unit investment trust (UIT), closed-end fund (CEF) and mutual fund transactions.
FINRA said that in the fined amount $900,000 is a fine that includes nearly $224,000 in disgorgement of commissions earned on the unsuitable trades. The remaining $540,000 represents restitution to 17 customers who incurred losses.
As part of this settlement, SunTrust must also review all UIT purchases and provide remediation to all eligible customers who did not receive the maximum sales charge discount.
FINRA found that SunTrust, through two brokers in the firm’s Maryland Region, engaged in a pattern of unsuitable short-term UIT, CEF and mutual fund transactions in accounts of 17 customers, most of whom were elderly and/or disabled. The brokers also engaged in unsuitable margin transactions in the accounts of 10 of the 17 customers.
FINRA also found that SunTrust failed to ensure that eligible customers received the maximum sales charge discount on UIT purchases and lacked adequate systems and procedures for monitoring and supervising UIT, CEF and margin transactions.
James Shorris, executive vice president and acting chief of enforcement at FINRA, said: “Firms must monitor for patterns of UIT and closed-end fund sales to ensure that such sales are suitable for the customer. SunTrust failed to meet that obligation, which caused its customers, including elderly customers, to incur significant losses.”