Triad Advisors LLC, headquartered in Norcross, Georgia, was censured and fined $125,000.00 by Financial Industry Regulatory Authority (FINRA) for failing to apply sales charge discounts to eligible customers’ purchases of unit investment trusts; and failed to develop and adequately implement supervisory policies and procedures to ensure that such customers received sales charge discounts on all eligible UIT purchases. Letter of Acceptance, Waiver and Consent, No. 2014042544301 (Mar. 16, 2016).
According to the AWC, sponsors of unit investment trusts (UITs) provide investors several methods to receive a sales charge discount pertaining to UIT purchases. The AWC stated that breakpoints are a common method, which is applied when investors increase the size of UIT investments. Another common method indicated in the AWC includes discounts that are applied when customers’ rollover or exchange funds into UIT investments.
The AWC stated that from May 1, 2009 through April 30, 2014, Triad failed to detect and apply the UIT discounts when customers were eligible to receive them. During this time, according to the AWC, 1,088 UIT purchases were eligible to receive a discount; but none were provided. Consequently, the firm’s clients were excessively charged an estimated $102,631.62. FINRA found that Triad’s conduct of failing to apply discounts in this regard was violative of FINRA Rule 2010.
The AWC further stated that the firm lacked the supervisory procedures prior to May 2012 to detect when UIT discounts would be applicable. The AWC indicated that Triad eventually put a procedure into effect in May 2012 in order to alert the firm when UIT discounts were detected, yet FINRA found it to be defective as it failed to address customers’ exchanges and rollovers.
Apparently, eighty-five percent of the eligible UIT discounts that were not applied consisted of exchanges and rollovers. FINRA found Triad’s conduct in this regard to be violative of FINRA Rules 2010 and NASD Conduct Rules 3010(a) and (b). In addition to the censure and fine, FINRA ordered Triad to provide customers with restitution amounting to $102,631.62 to address the discounts that Triad failed to provide investors.
This is not the first time that Triad has been subject to disciplinary action by FINRA for misconduct pertaining to supervisory failures. The AWC indicated that in 2013, Triad was censured and fined $650,000.00 after consenting to findings that the firm inadequately supervised consolidated reports. Triad was ordered by FINRA to provide restitution of at least $375,000.00 in connection with the 2013 disciplinary action.
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