Sigma Financial Corporation, headquartered in Ann Arbor, Michigan, was censured and fined $100,000.00 by Financial Industry Regulatory Authority (FINRA) after consenting to findings that it overcharged customers concerning their purchases of unit investment trusts, and for the firm’s failure to implement adequate supervisory procedures pertaining to sales charge discounts to ensure customers received them. Letter of Acceptance, Waiver and Consent, No. 2014041839601 (Aug 1, 2016).
According to the AWC, between May 1, 2009 and April 30, 2014, Sigma Financial Corporation apparently did not detect and properly apply discounts to sales charges with respect to clients who purchased unit investment trusts and were eligible to receive them.
FINRA stated in the AWC that unit investment trust sponsors commonly provide unit investment trusts customers with ways to receive a sales charge discount. The AWC stated that breakpoint discounts are typically applied upon investors’ bulk purchases of unit investment trusts. Another method utilized by firms, according to FINRA, is for customers to be provided with discounts upon their rollovers or exchanges of monies into unit investment trusts.
According to the AWC, Sigma Financial Corporation did not apply discounts for sales charges on three hundred and thirty-nine purchases unit investment trusts purchases when customers were eligible. Consequently, FINRA claimed that customers paid $92,053.63 in excess charges. FINRA found Sigma Financial Corporation’s overcharging of customers to be violative of FINRA Rule 2010.
The AWC also stated that from May 1, 2009 through April 30, 2014, Sigma Financial Corporation did not create and implement adequate supervisory systems and written procedures to make sure that eligible unit investment trust customers would actually receive discounts. As such, FINRA found that the firm violated FINRA Rule 2010 as well as NASD Rules 3010(a) and 3010(b) in this regard. In addition to the fine and censure, FINRA ordered the Sigma Financial Corporation to provide restitution of $92,053.63 to the firm’s affected clients.
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