- November 15, 2020
- Oppenheimer & Co.
Ivan Shore is a Financial Advisor at Oppenheimer & Co. in New York, NY. Ivan Shore has been in the securities industry since 1981 and previously worked at Gruntal & Co.
In November 2020, the Financial Industry Regulatory Authority (FINRA) sanctioned Ivan Shore, suspending him for a period of three months and imposing a fine. FINRA sanctioned Ivan Shore for allegedly engaging in short-term trading of Unit Investment Trusts. Ivan Shore is the latest of many Financial Advisors and brokerage firms to be sanctioned for improper sales practices relating to Unit Investment Trusts.
According to the FINRA sanction:
“Without admitting or denying the findings, Shore consented to the sanctions 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 Shore recommended his customers roll over UITs prior to maturity on approximately 900 occasions. Indeed, although Shore’s customers’ UITs typically had a 24-month maturity period, Shore recommended that they sell their UITs after holding them for, on average, only 231 days, and use the proceeds to purchase a new UIT. Of the early rollovers recommended by Shore, more than 240 were series-to-series rollovers. In other words, on those occasions, Shore recommended that his customers roll over a UIT before its maturity date in order to purchase a subsequent series of the same UIT, which, generally had the same or similar investment objectives and strategies as the prior series. Shore’s recommendations caused his customers to incur unnecessary sales charges and were unsuitable in view of the frequency and cost of the transactions. Shore’s customers received reimbursement of these excess sales charges from his member firm.”
For a copy of the FINRA sanction, click here
On December 30, 2019, Oppenheimer & Co. became the latest brokerage firm sanctioned by FINRA for unlawful sales practices relating to Unit Investment Trusts (UITs”). Oppenheimer was fined $800,000 and ordered to pay restitution to customers in the amount of $3.87 million. The alleged misconduct related to short-term transactions in UITs, which are designed to be long-termn investment vehicles. These transactions resulted in high commissions to customers.
According to the FINRA Letter of Acceptance, Waiver and Consent (“AWC”), “During the Relevant Period, Oppenheimer executed more than $6.4 billion in UIT transactions that generated more than $68.6 million in sales charges. The $6.4 billion in UIT transactions included more than $753.9 million in proceeds from transactions in which UITs were sold more than 100 days before their maturity dates and some or all of the proceeds were used to purchase one or more new UITs (“early rollovers”). Approximately $237.1 million of the proceeds were for transactions in which customers sold UITs more than 100 days prior to their maturity dates and used some or all of the proceeds to purchase a subsequent series of the same UIT, which, as noted above, had, in many cases, the same or similar investment objectives and strategies as the prior series (“series-to-series early rollovers”).”
A copy of the FINRA AWC can be access by clicking here
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.
Oppenheimer is one of several brokerage firms that was audited and ultimately sanctioned by FINRA regarding the sale of UITs. Specifically, FINRA was focused on short-term trading of UITs that have produced excessive commissions for Financial Advisors and minimal gain for the clients. UITs are known to produce commissions of 2%-3%, which is above-average for most securities products.
Financial advisors 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.
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at firstname.lastname@example.org.