UBS Settles FINRA Claims Over Supervision of Short-Term Preferred Stock Trades
From the desk of Jim Eccleston at Eccleston Law
According to AdvisorHub, UBS Wealth Management USA’s broker-dealer has agreed to pay $3.5 million in sanctions over allegations of supervisory failures related to short-term trading of syndicate preferred stock. According to the settlement, known as an Acceptance, Waiver and Consent (“AWC”), the sanctions include a $500,000 fine, disgorgement of $2.65 million in commissions, and restitution of nearly $344,000 to customers affected by premature sales. UBS agreed to the terms without admitting or denying FINRA’s findings.
From 2017 to 2018, at least 22 UBS advisors or teams recommended nearly 2,000 unsuitable short-term trades in syndicate preferred stock, which the AWC states is a violation of FINRA Rule 2111 related to supervisory systems. AdvisorHub reports that UBS lacked written procedures or guidance on preferred stock holding periods, and its electronic supervisory systems only flagged sales made within 90 days by brokers conducting the highest volume of preferred stock business.
Preferred stocks are typically purchased for income generation and held long-term. However, FINRA found that UBS advisors advised customers to sell the securities within 180 days at a loss, primarily to capture commissions and fees.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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