Finra Hits Another Veteran Broker Over UIT Sales
The Financial Industry Regulatory Authority’s ongoing campaign to rein in alleged sales abuses involving short-term trading of unit investment trusts in customer accounts has led a 23-year veteran advisor to accept a $10,000 fine and three-month suspension.
Gunter, who left Stifel in August 2017 to join Wells Fargo Advisors’ private client group, also conveyed misleading information in ‘switch letters’ to customers about the costs they would incur by by understating commissions by an average of $2,500 on average, the letter said.
Gunter, who worked at Raymond James and Morgan Keegan—which RayJay acquired—before joining Stifel in 2013, could not immediately be reached for comment. The broker, whose suspension will start in December, accepted the Finra sanction without admitting or denying the specific findings.
Finra began conducting targeted exams of sales of UITs, which include creation and development fees along with initial and deferred charges, in 2016, and has highlighted its concerns in several examination priority letters. Companies ranging from wirehouses like Morgan Stanley to regionals such as Raymond James Financial and Oppenheimer & Co. have paid millions of dollars in fines to regulators and agreed to reimburse customers for failing to properly supervise UIT sales.
Stifel itself agreed in May to pay more than $3.6 million for allegedly giving inaccurate information on the costs of rollovers and related supervisory violations.
Finra settlement letters with firms do not specify individual brokers, who—like Gunter—are often the subject of subsequent enforcement actions. In its May settlement, St. Louis-based Stifel agreed to pay a $1.75 million fine and to reimburse 1,700 customers for UIT violations.
UITs, which are typically meant to be held for 24 months, carry high sales charges that can reach 4.0%, Finra’s settlement letters says. Premature rollovers can add an additional commission of 2.95%.
Gunter’s trading recommendations violated Finra’s suitability rule, which in turn triggers a charge of violating its Rule 2010 requiring member firms and associated persons to observe “high standards of commercial honor and just and equitable principles of trade.”