Cambridge Investment Research, Inc has agreed to pay a fine of $200,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From June 30, 2020, through February 2023, the firm failed to reasonably supervise the representative’s recommendations for compliance with Reg BI’s Care Obligation.

Starting in June 2020, supervisory personnel repeatedly escalated concerns regarding not only the volume of alerts generated by the representative’s Unit Investment Trust (UIT) recommendations to retail customers, but also the vague rationales he provided to justify those recommendations.

Separately, as early as May 2021, compliance personnel responsible for reviewing alerts for patterns of potential misconduct raised concerns regarding the representative’s patterns of early UIT redemptions, particularly his pattern of selling UITs significantly before their maturity dates.

Nonetheless, despite these red flags, the firm did not reasonably investigate the representative’s UIT recommendations. The supervisors to whom these concerns were escalated did not question the representative’s stated reasons for selling UITs before maturity, nor did they reasonably evaluate the additional costs customers incurred as a result of these early UIT redemptions.

As a result, the firm failed to take timely steps to address the representative’s pattern of recommending that customers sell UITs prior to maturity.

In January 2023, compliance personnel directly escalated concerns to the firm’s senior compliance leadership, which prompted the firm to conduct a reasonable investigation and terminate the representative in February 2023.

During the time he was associated with Cambridge, the representative recommended that his retail customers sell UITs after holding them, on average, for only 56% of their term lengths. Moreover, the representative’s customers sold 90% of their UIT positions prior to maturity, and they typically rolled the proceeds from these sales into new UIT positions.

Collectively, these recommendations caused 184 customers to pay at least $389,200.62 in costs and fees during the relevant period that they would not have incurred had they held the UITs until their maturity dates.

Therefore, Cambridge violated FINRA Rules 3110 and 2010.

The firm has agreed to a censure on top of the $200,000 fine.

Cambridge Investment Research, Inc., which has been a FINRA member since December 1995, is headquartered in Fairfield, Iowa. The firm provides securities brokerage, wealth management, and investment banking services. The firm has approximately 4,900 registered representatives and approximately 2,800 branch offices.