The Financial Industry Regulatory Authority (FINRA) has ordered American Portfolios Financial Services, Inc. to pay $1,232,939 in restitution, plus interest, to customers and has fined the member firm $400,000 for failing to reasonably supervise recommendations that customers sell unit investment trusts (UITs) before their maturity dates, which resulted in customers paying unnecessary costs and fees.

UITs are investment products that hold a fixed portfolio of securities and terminate on a specified maturity date, often after 15 or 24 months. UITs are generally intended to be held to maturity and the structure of sales charges reflects that assumption. A registered representative’s recommendation for a customer to sell a UIT before maturity and purchase a new UIT with the proceeds results in sales charges that would not be incurred when holding the UIT to maturity.

From January 2018 to October 2024, when it became part of Osaic Wealth, Inc., American Portfolios failed to implement a system—including written policies and procedures—that was reasonably designed to supervise UIT recommendations for compliance with FINRA Rule 2111 (Suitability) and Regulation Best Interest’s Care Obligation. During this period, American Portfolios customers purchased approximately $470 million in UITs.

American Portfolios’ supervisory system was not reasonably designed to identify representatives who repeatedly recommended that their customers sell UITs before maturity. This included two representatives who worked as part of a team and recommended customers sell UITs prior to maturity approximately 61% of the time. On average, these customers held their UIT investments for just half of their term lengths.

The two representatives also generally recommended that their customers use the proceeds from these early sales to purchase new UITs with additional sales charges.

A third representative recommended customers sell their UITs prior to maturity 78% of the time, with these customers holding their investments on average for just over half of the UITs’ term lengths.

Together, these three representatives caused 295 investors to pay $1,232,939 in unnecessary costs and fees, which will now be returned to them. Individual restitution will range from $102.27 to $399,055.29.

In settling this matter, American Portfolios consented to the entry of FINRA’s findings, without admitting or denying the charges.