Summit Brokerage Services, Inc., headquartered in Boca Raton, Florida, was censured and fined $75,000.00 by the Financial Industry Regulatory Authority (FINRA) after consenting to findings that it overcharged customers regarding unit investment trust purchases, and failed to implement adequate supervisory procedures to prevent the overcharging of customers. Letter of Acceptance, Waiver and Consent, No. 2014041840301 (July 12, 2016).
According to the AWC, from May 1, 2009 through April 30, 2014, the firm 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 noted in the AWC that unit investment trust sponsors typically provide purchasers of such unit investment trusts with mechanisms to receive a sales charge discount. The AWC stated that breakpoint discounts are commonly applied upon investors’ bulk purchases of unit investment trusts. Alternatively, as the AWC stated, customers could have received discounts upon rolling over or exchanging funds into the unit investment trusts.
The AWC stated that in Summit Brokerage Services’ case, the firm did not apply discounts for sales charges on three hundred and sixty-two purchases of unit investment trusts. As a result, FINRA claimed that investors overpaid in an estimated amount of $62,236.26 in the aggregate. FINRA found that the firm’s overcharging of customers in this regard was violative of FINRA Rule 2010.
The AWC also stated that from May 1, 2009 through April 30, 2014, Summit Brokerage Services had not created and implemented the requisite supervisory practices and written procedures to make sure that customers who were eligible to receive sales charge discounts would actually receive them.
The AWC reported that the firm completely failed to contain written supervisory procedures that were specific to such discounts. Ultimately, 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 Summit Brokerage Services to provide restitution amounting to $83,757.49 to the clients of the firm who were affected by their overcharging.
This is not the first time that Summit Brokerage Services has been sanctioned for related misconduct. The AWC stated that in 2015, Summit was censured and fined $250,000.00 by FINRA in connection with the failed supervision of non-traditional exchange traded funds. As a consequence, the firm was required to provide restitution to affected customers.
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