Cetera Brokerage Firm Investors Capital Corp Fined $1.1 Million Over Sales of Unit Investment Trusts

Silver Law Group is investigating investor claims against Cetera Financial Group-owned Investors Capital Corp. (CRD# 30613) after FINRA fined the firm and ordered it to pay restitution of over $1.1 million for allegations of short-term trading of unit investment trusts (“UITs”).

According to the Acceptance, Waiver & Consent (“AWC”) Investors Capital Corp. (“Investors Capital”) and FINRA entered into in October 2016, FINRA found that Investors Capital recommended unsuitable short-term trading of UITs and Steepener Notes (“Steepener Notes”) in 74 customer accounts. Additionally, Investors Capital failed to apply sales charge discounts to certain customers’ purchases of UITs, according to the AWC. The misconduct occurred between June 2010 and September 2015.

The violations, according to the AWC, occurred in part because Investors Capital lacked adequate systems and procedures to supervise the sales of UITs and Steepeners. FINRA fined Investors Capital $250,000 and the firm agreed to pay $842,000 in restitution.

Investors Capital is part of Cetera Financial Group’s and Cetera Advisor Networks, LLC’s (CRD# 13572) extensive networks of brokerage firms. Cetera is consolidating many of its firms, including Investors Capital and VSR Financial Services, Inc. (CRD# 14503). Our firm posted on our website about VSR Financial Services and Investors Capital closing.

Some of Cetera’s firms, including Investors Capital, are known for their sales of alternative investments such as nontraded REITs, BDCs, private placements, and promissory notes. Just this month, FINRA sanctioned VSR Financial Services $400,000 for misconduct surrounding the sale of L-share Variable Annuities. In 2013, FINRA sanctioned VSR $550,000 for failing to supervise the sale of alternative investments and, consequently, overconcentrating customers’ accounts with these investments.

Investors Capital is based out of Lynnfield, Massachusetts. Investors Capital is registered with Connecticut, Georgia, Maine, Nevada and West Virginia.

A UIT is a type of fund that is a mixture of an actively managed fund and a fixed portfolio of income-producing securities that is purchased and held to maturity. Typically, there is a one-time public offering of only a specific, fixed number of units, like closed-end funds, and there is very little liquidity. Normally investors hold them to maturity, but the UIT issuer can buy back the units at the net asset value (“NAV”).

UITs are complex and not suitable for all investors. According to an InvestmentNews report, FINRA has been cracking down on brokerage firms for failing to give clients discounts for large purchases.

If you invested with Investors Capital, VSR Financial Services, or any other Cetera-related brokerage firm and have sustained losses, you may be entitled to recover some of your investment losses. Please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345 to speak to an attorney to find out how we may be able to help you recover some of your investment losses. You owe us nothing if we don’t recover.