Former Capitol Securities Management Inc. Broker, Michael Rubel, Suspended By FINRA For 45 Days For Allegedly Engaging In Short-term Trading Of Unit Investment Trusts
Michael Rubel (CRD # 4935564) is currently a registered Financial Advisor at B. Riley Wealth Management in Red Bank, NJ. Michael Rubel was previously registered at Capitol Securities Management, Inc., Wells Fargo Advisors, LLC, and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on September 1, 2020, Michael Rubel was sanctioned by FINRA, suspending him for forty-five business days, for alleged short-term trading of Unit Investment Trusts. According to the FINRA sanction:
“Without admitting or denying the findings, Rubel consented to the sanction and to the entry of findings that he engaged in an unsuitable pattern of short-term trading of unit investment trusts (UITs) in customer accounts. The findings stated that Rubel recommended that certain of his customers roll over UITs more than 100 days prior to maturity, on approximately 276 occasions. Indeed, although his customers’ UITs typically had a 24-month maturity period, Rubel recommended that they sell their UITs after holding them for, on average, only 244 days, and, in some instances, use the proceeds to purchase a new UIT. Of the approximately 276 early rollovers recommended by Rubel, 13 were series-to-series rollovers. In other words, on those 13 occasions, Rubel recommended that his customers roll over a UIT before its maturity date in order to purchase a subsequent series of the same UIT, which, as noted above, generally had the same or similar investment objectives and strategies as the prior series. Rubel’s recommendations caused his customers to incur unnecessary sales charges and were unsuitable in view of the frequency and cost of the transactions.”
For a copy of the FINRA sanction, click here
For a copy of Michael Rubel’s CRD, click
A Unit Investment Trust is a closed-end investment company typically issues redeemable securities (or “units”), like a mutual fund, which means that the UIT will buy back an investor’s “units,” at the investor’s request, at their approximate net asset value (NAV). A UIT typically will make a one-time “public offering” of only a specific, fixed number of units (like closed-end funds). Many UIT sponsors, however, will maintain a secondary market, which allows owners of UIT units to sell them back to the sponsors and allows other investors to buy UIT units from the sponsors.
A UIT will have a termination date that is established when the UIT is created, although it may be in the distant future. In the case of a UIT investing in bonds, for example, the termination date may be determined by the maturity date of the bond investments. When a UIT terminates, any remaining investment portfolio securities are sold and the proceeds are paid to the investors.
A UIT does not actively trade its investment portfolio. That is, a UIT buys a relatively fixed portfolio of securities (for example, five, ten, or twenty specific stocks or bonds), and holds them with little or no change for the life of the UIT. Because the investment portfolio of a UIT generally is fixed, investors know more or less what they are investing in for the duration of their investment. Investors will find the portfolio securities held by the UIT listed in its prospectus. The commissions paid to brokers who sold UITs can be as high as 4%.
UITs have been a focal point of FINRA examinations since 2018, with Financial Advisors and brokerage firms across the country being fined and sanctioned for unlawful sales practices in these investment vehicles.
Financial advisors also have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
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