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Wells Fargo Hit With 3.1 Million Penalty for Unit Investment Trust Sales

Levin Law | 1.5.2022
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Levin Law, P.A. Is Investigating Losses Related to Short-Term Trading and Early Rollovers of UITs

The national securities and class action law firm Levin Law, P.A. (“Levin Law”) is investigating investment losses resulting from short-term trading of Unit Investment Trusts (UITs). 

A multi-year investigation by the Financial Industry Regulatory Authority (FINRA) of Unit Investment Trust (UIT) early rollovers has concluded with multi-million dollar settlements against six member firms, including Wells Fargo. The examination found that these firms failed to reasonably supervise early rollovers of UITs resulting in “potentially excessive sales charges.”

If you incurred excessive charges or suffered financial harm as a result of a broker-dealer’s recommendation and sale of a UIT, contact Levin Law for a free case evaluation. Call (305) 402-9050 or email to discuss your case with managing partner Brian Levin. 

FINRA Targeted Examination of UIT Early Rollovers

In September 2016, FINRA announced that they were conducting a targeted examination into member firms’ Unit Investment Trust rollovers. The regulatory agency requested copies of the firm’s Written Supervisory Procedures (WSPs) with respect to UITs, exception reports, and names of registered representatives that generated the highest number of early rollovers and had the highest revenue.

On December 13, 2021, FINRA concluded its investigation, which resulted in settlements with several member firms and nearly $17 million in restitution for thousands of harmed investors. According to a press release, all of the firms had “failed to reasonably supervise early rollovers of UITs” resulting in financial losses to their customers.

Are UITs Suitable Investments?

As noted by FINRA, Unit Investment Trusts are generally intended as long-term investments. Investors incur higher sales charges for selling UITs prior to their maturity date. This, in and of itself, raises questions over whether it is a suitable recommendation to be made by a registered representative. 

The agency found that in each case, member firms failed to adequately supervise their registered representatives in the early rollover or short-term sales of these products. UITs are an alternative and complex investment that offers investors shares in a fixed portfolio of securities in a one-time public offering. 

Wells Fargo Failure to Supervise

FINRA found that for UIT transactions between July 1, 2013, and June 30, 2018, Wells Fargo failed to establish and maintain a supervisory system in compliance with regulatory rules regarding suitability. The firm’s WSPs were not reasonably designed to identify early UIT rollovers and detect unsuitable rollover recommendations made by their registered representatives.

As a result, Wells Fargo Clearing Services, LLC agreed to a censure, a $500,000 fine, and to pay restitution in the amount of $2,083,624.66. Wells Fargo Advisors Financial Network, LLC also agreed to a censure, a $100,000 fine, and to pay restitution in the amount of $375,137.67.

Other brokerages that failed to supervise early rollovers of UITs include Morgan Stanley Smith Barney LLC; Merrill Lynch, Pierce, Fenner & Smith Incorporated; Stifel, Nicolaus & Company, Incorporated; Oppenheimer & Co. Inc.; and Citigroup Global Markets Inc.

Contact Levin Law, P.A. for a Free Case Evaluation

If you have sustained losses related to an early rollover or short-term sale of a UIT, contact Levin Law, P.A. for a free case evaluation. Call (305) 402-9050 or email to speak directly with Levin Law founder and managing partner Brian Levin.

Most cases are handled on a contingency fee basis, meaning that clients are not obligated to pay Levin Law’s attorney fees unless money is recovered on their behalf. 

About Levin Law

Levin Law is a premier national securities, cryptocurrency, and class action law firm.  Brian Levin, Levin Law’s managing attorney, has obtained settlements and recoveries in excess of $150,000,000 in assets through arbitration and litigation for individual and institutional investors throughout the country and the rest of the world. Levin Law represents cryptocurrency investors, retirees, individual investors, high-net-worth investors, ultra-high-net-worth investors, institutions, family offices, trusts, publicly held companies, and others.

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