The Financial Industry Regulatory Authority has fined six independent brokerage firms for not giving clients the proper discounts on big sales of business development companies and real estate investment trusts. According to InvestmentNews, the self-regulatory organization has been scrutinizing whether financial firms are giving the appropriate discounts, also known as breakpoint discounts to clients.
When the sale of certain nontraded real estate investment trusts is anywhere from over $500K up to $1 million, a discount is usually available. This means that the REIT’s price, which is typically at $10/share with the broker getting a 70 cent commission, can go down to $9.90/share and a commission of 60 cents.
FINRA said that J.P. Turner, Voya Financial Inc. (VOYA), Transamerica Financial Advisors Inc., Investacorp., National Planning Corp., and Cetera Investment Services did not identify and put into effect volume discounts for certain eligible purchase of BDCs and non-traded REITs. Because of this, said the SRO, customers paid sales charges that were too high. Now, all six firms will have to pay restitution to the clients that were affected.
Financial firms usually depend on brokers and their supervisors to make sure that clients get the proper discounts. FINRA said that the six firms did not maintain supervisory systems for the products.
The fines imposed include:
· $325K for Voya plus $42K of restitution
· $85K for Transamerica and $51K of restitution
· $50K for Investacorp and $27,400 of restitution
· $30K for Cetera Investment Services plus $17,900K of restitution
· $45K for J.P. Turner and $21,200 of restitution
· $30K for National Planning Corp. and $16,400 of restitution
By settling, the firms are not denying or admitting to the regulator’s findings.
If you believe that your excessive losses are because of negligence, carelessness, or mistakes made by a brokerage firm or a financial representative, you should speak with one of our stockbroker fraud lawyers today to explore your legal options. We work with institutional investors and high net worth individuals.
Finra fines six IBDs for failing to give discounts on large REIT sales, InvestmentNews, October 14, 2015