WFG Investments, Inc., headquartered in Dallas, Texas, was censured and fined $65,000.00 by the Financial Industry Regulatory Authority (FINRA) after consenting to findings that the firm failed to apply sales charge discounts to eligible customers’ purchases of unit investment trusts (UITs); and failed to develop and manage supervisory practices and protocol to make sure eligible customers received sales charge discounts on UIT purchases. Letter of Acceptance, Waiver and Consent, No. 2014041680101 (June 10, 2016).
According to the AWC, from May 1, 2009 through April 30, 2014, WFG had not identified and applied UIT discounts when certain customers were eligible for receiving them. As a result, WFG’s customers were excessively charged an estimated $68,975.00. FINRA found that WFG’s failure to provide customers with discounts was violative of FINRA Rule 2010.
The AWC stated that sponsors of unit investment trusts (UITs) provide investors several methods to receive a sales charge discount pertaining to eligible UIT purchases. The AWC noted that breakpoints are commonly applied in such cases, and come into effect when customers increase the size of UIT investments. The AWC stated that another commonplace scenario for customers’ discounts to be applied occurs when customers’ rollover or exchange funds into UIT investments.
The AWC stated that WFG did not have any supervisory practices developed and enforced in order to identify whether customers were in receipt of eligible discounts. Apparently, WFG did not make sure that its clearing firm’s systems properly accounted for purchases. Instead, the firm apparently heavily relied upon its clearing firm to total the purchases occurring on the same day for the volume discounts to apply.
FINRA found WFG’s aforementioned supervisory failures to be violative of FINRA Rules 2010 and NASD Conduct Rules 3010(a) and (b). Consequently, FINRA imposed a censure and $65,000.00 fine, and ordered the firm to provide restitution of $75,563.62 to affected clients.
Public disclosure records reveal that WFG has been disciplined in the past for related supervisory failures. Specifically, the firm was censured and fined $700,000.00 by FINRA after consenting to findings that the firm failed to properly maintain a legitimate supervisory system to ensure that customers’ securities transactions that were effected in their accounts were suitable. Letter of Acceptance, Waiver and Consent, No. 2013035346501 (Dec 2014).
Additionally, WFG was censured and fined $200,000.00 by FINRA after consenting to findings that the firm violated Securities Act Section 5, SEC Rules 17a-3, 17a-4, and NASD Rules 3010(a) and (b), as well as Rules 3110(a) and (c). Letter of Acceptance, Waiver and Consent, No. 2010025332201 (Mar 2013).
Finally, the firm was censured and fined $40,000.00 by FINRA after consenting to findings that the firm’s supervisory failures regarding securities business was violative of SEC Rules 17a-3(a), 17a-4(b), 15c2-4, as well as MSRB Rules G-8, G-27(c), and NASD Rules 3010(b), 2110, 2440, and 6230. Letter of Acceptance, Waiver and Consent, No. 2009016279101 (June 2012).
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