Former Oppenheimer Broker Suspended over UIT Trades

A former Oppenheimer broker with 28 years of experience and a clean regulatory record has agreed to a fine and suspension for allegedly encouraging clients to prematurely sell unit investment trusts and use the proceeds to buy new ones in violation of a suitability rule.

Frederick Levine recommended at least 950 “early” rollovers of UITs over almost three years before resigning “voluntarily” from Oppenheimer in 2014 to join RBC Wealth Management, according to a consent, waiver and consent letter he signed with the Financial Industry Regulatory Authority.

About 63% of the new purchases customers made with their sale proceeds were for UITs with the same objectives and strategies as those that they sold, according to the order Finra published on Monday. Levine agreed to a three-month suspension and $5,000 fine, without admitting or denying the enforcement findings.

“Levine’s recommendations caused his customers to incur unnecessary sales charges, and were unsuitable in view of the frequency and cost of the transactions,” Finra said, noting that the passively managed securities portfolios typically cost buyers 3% to 4% of the purchase price.

The advisor, a 12-year Oppenheimer veteran who is part of a four-advisor RBC team in Florham Park, NJ,  did not immediately return a request for comment.

The fine continues a crackdown on abusive UIT rollover recommendations, which Finra said can generate sales charges of up to 12.8% over a two-year period.

Morgan Stanley in  2017 agreed to pay $3.5 million and reimburse customers almost $10 million as part of a Finra settlement over failing to supervise UIT sales by hundreds of brokers from 2010 through mid-2014.

Levine appears to have been identified in a targeted industry exam of UIT transactions occurring between January 2014 and mid-2016 that Finra opened almost four years ago.

It levied a similar $5,000 fine and three-month suspension in April against Brian D. Engstrom, another former Oppenheimer broker.

Oppenheimer reimbursed excess sales charges to Levine’s customers as part of a $3.87 million settlement in December with Finra that included an $800,000 fine for failing to supervise UIT sales over five years.

Finra earlier this year fined Cambridge Investment Research, an independent broker-dealer,  $150,000 for improper procedures that failed to alert it to short-term UIT trading.

Raymond James Financial last year reached a $15 million settlement with the Securities and Exchange Commission for, among other allegations, overcharging customers more than $6 million for UIT trades. RayJay terminated at least six brokers for improper UIT recommendations in 2018, according to sources.