Sagepoint Financial Advisor, Gary Bowman, Sanctioned By FINRA For Unit Investment Trust Violations?
Gary Bowman (CRD 2035699) has been in the securities industry since 1990 and is currently registered with Sagepoint Financial. Gary Bowman was previously registered with Arque Capital and Fox & Co. Investments.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on July 1, 2021, Gary Bowman was sanctioned by FINRA regarding alleged violative sales practices in connection with Unit Investment Trusts.
According to the FINRA sanction, “Without admitting or denying the findings, Bowman consented to the sanctions and to the entry of findings that he engaged in an unsuitable pattern of early rollovers of unit investment trusts (UITs). The findings stated that, on certain occasions, Bowman recommended that his customers roll over a UIT before its maturity date to purchase a subsequent series of the same UIT that generally had the same or similar investment objectives and strategies as the prior series. Bowman’s recommendations caused his customers to incur unnecessary sales charges and were unsuitable in view of the frequency and cost of the transactions. Bowman’s customers received reimbursement of these excess sales charges from his member firm in connection with FINRA’s separate settlement with the firm.” Gary Bowman was suspended three months and fined $10,000.
For a copy of the FINRA sanction for Gary Bowman, click 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.
Gary Bowman is one of several Financial Advisors that has been sanctioned by FINRA regarding the sale of UITs. Specifically, FINRA is focused on short-term trading of UITs that have produced excessive commissions for Financial Advisors, UITs are known to produce commissions of 2%-3%, which is above-average for most securities products. By selling UITs prior to maturity, the cost of ownership to the client increases and, in turn, the broker is able to generate higher commissions in a shorter duration of time. It is alleged that Gary Bowman sold UITs prior to maturity and rolled-over the proceeds into new UIT offerings, generating a commission.
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.
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