Scott Ryland Mathews of Charlotte North Carolina a stockbroker formerly registered with Merrill Lynch Pierce Fenner Smith Incorporated has been fined $5,000.00 and suspended for three months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity supported by findings of Mathews providing unsuitable recommendations to customers regarding unit investment trust transactions during the period that he was associated with Merrill Lynch. Letter of Acceptance Waiver and Consent No. 2018060359901 (June 25, 2021).
According to the AWC, customers of Merrill Lynch were advised by Mathews to rollover their unit investment trust holdings before maturity. The AWC indicated that there were 1,800 occurrences of customers selling 100 days before their UIT positions matured. Those UITs contained maturities ranging between 15 and 24 months. They were sold on average after 262 days at which point the customers’ proceeds were used for buying new unit investment trusts.
The AWC stated that 330 of the 1,800 rollovers fit the description of series-to-series rollovers. FINRA referred to Mathews recommending that his customers roll over UITs before maturity to buy newer UITs with similar or the same strategies and objectives as the older ones.
FINRA indicated that in one case, a customer was steered by Mathews towards buying a unit investment trust which focused on income and possible capital appreciation. That UIT contained a portfolio of shares in closed-end investment companies. The stockbroker recommended that the customer terminate the position after 223 days so that their money could be placed into a newer version of that UIT. FINRA indicated that the newer UIT contained the same objectives and investment strategy. Because the recommendation involved a premature sale (230 days before maturity), the customer was required to pay additional and unnecessary sales charges.
FINRA stated that the customers paid unreasonable sales charges by following the investment recommendations made by Mathews. The stockbroker’s recommendations were unsuitable because of the cost and frequency of those transactions. Mathews violated FINRA Rules 2111 and 2020 and NASD Rule 2310.
FINRA Public Disclosure additionally confirms that a customer filed an investment related complaint concerning Mathews’ conduct where the customer sought compensatory damages based upon allegations that Matthews neglected to follow the customer’s instructions in regard to investments in closed-end funds through Banc of America Investment Services Inc.
Mathews was registered with Merrill Lynch between October 23, 2009 and December 2, 2020.