Securities Arbitration Lawyer Blog
Iorio Altamirano LLP is investigating claims on behalf of SagePoint Financial customers who invested in Unit Investment Trusts (UITs). If you have lost money with SagePoint, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
SagePoint and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on June 10, 2020, over allegations that between January 2013 and December 2017, SagePoint violated FINRA rules. Specifically, that it:
- Failed to establish and maintain a supervisory system, and failed to establish, maintain, and enforce written supervisory procedures (WSPs) that were reasonably designed to supervise the suitability of representatives’ recommendations to customers for early rollovers of Unit Investment Trusts (UITs).
As part of the AWC, SagePoint was censured and agreed to a fine of $300,000. SagePoint also agreed to pay over $1.3 million in partial restitution to customers.
SagePoint Financial, Inc. is a registered broker-dealer and investment adviser. SagePoint is headquartered in Phoenix, Arizona, and has been a FINRA member since May 2005. The firm has around 1,800 registered representatives and 815 branch offices.
If you have lost money with SagePoint, contact New York securities arbitration lawyer Jorge Altamirano of Iorio Altamirano LLP at jorge@ia-law.com or toll-free at (855) 430-4010.
What is a Unit Investment Trust (UIT)?
Unit Investment Trusts (UITs) sell investors shares or “units” in a fixed portfolio of securities through a one-time public offering. UITs are considered long-term investments that mature on a specific date; generally, after 15 or 24 months. Once the UIT matures, the underlying securities are sold, and the proceeds are paid to investors.
A UIT’s portfolio is passively managed between the trust’s inception and its maturity date. UIT sponsors often offer UIT product lines in successive “series.” These new series coincide with the maturity date of prior series. Successive series of UITs tend to have the same or similar investment objectives and investment strategies as the prior series, despite a change in the underlying securities that make up the fixed portfolio.
Investors can expect to pay various upfront sales charges and fees, including an initial sales charge, a deferred sales charge, a creation and development fee (C&D fee), and a fee for annual operating expenses.
A broker recommending the sale of a customer’s UIT before its maturity date and who then uses the sale proceeds to purchase a new UIT would cause their customer to incur greater sales charges than if the customer held the UIT to maturity. As a result of their long-term nature, structure, and costs, short-term trading of UITs may be unsuitable.
SagePoint Failed To Reasonably Supervise Patterns of Short-Term Trading of UITs
The AWC indicates that SagePoint executed over $895 million in UIT transactions generating more than $17.2 million in sales charges.
- $203.7 million represented transactions in which UITs were sold before their maturity dates, and customers used some or the entire proceeds for early rollover purchases into new UITs.
- $65.8 million represented transactions in which UITs were sold before their maturity dates, and customers used some or the entire proceeds for series-to-series early rollovers (i.e., purchasing a subsequent series of the same UIT).
Further, FINRA alleges that SagePoint failed to establish and maintain a supervisory system, and it failed to establish, maintain, and enforce written supervisory procedures (WSPs) reasonably designed to supervise the suitability of its representatives’ recommendations to customers for early rollovers of UITs. The firm’s WSPs did not discuss early rollovers or series-to-series early rollovers or provide guidance to SagePoint supervisors regarding how to monitor for potentially unsuitable patterns of either early rollovers or series-to-series early rollovers.
SagePoint did not use automated reports, alerts, or similar tools to supervise for potentially unsuitable patterns of early UIT rollovers. The firm’s review of UIT transactions through its order entry system was not focused on suitability concerns related to early UIT rollovers. As a result, SagePoint failed to identify that firm representatives recommended potentially unsuitable early rollovers, including series-to-series early rollovers. These rollovers caused customers to incur over $1.3 million in sales charges that would not have been incurred had customers held the UITs until their maturity dates.
A FINRA restitution order does not preclude investors from pursuing their own claims to seek restitution or other available remedies. Investors harmed by SagePoint’s failures may have a claim against the firm.
If you have lost money with SagePoint, contact New York securities arbitration lawyer Jorge Altamirano of Iorio Altamirano LLP at jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.