FINRA suspends Oppenheimer & Co representative for engaging in unsuitable short-term trading
The United States Financial Industry Regulatory Authority (FINRA) has imposed a three-month suspension on Ivan Shore, who is registered as a General Securities Representative and a General Securities Sales Supervisor through an association with Oppenheimer & Co. Inc. The suspension is a part of a settlement.
Between July 1, 2011 and December 31, 2015, Shore engaged in an unsuitable pattern of short-term trading of Unit Investment Trusts (UITs) in customer accounts.
Explaining how trading of UIT works, FINRA notes that a registered representative who recommended the sale of a customer’s UIT before its maturity date and used the sale proceeds to purchase a new UIT would cause the customer to incur greater sales charges than if the customer had held the UIT until maturity.
Due to the long-term nature of UITs, their structure, and their costs, short-term trading of UITs may be improper.
During the relevant period, Shore recommended his customers roll over UITs more than 100 days prior to maturity on approximately 900 occasions. Although his customers’ UITs typically had a 24-month maturity period, Shore recommended that they sell their UlTs after holding them for, on average, only 231 days, and use the proceeds to purchase a new UIT.
Of the approximately 900 early rollovers recommended by Shore, more than 240 were “series-to-series” rollovers. Put otherwise, on more than 240 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, as noted above, generally had the same or similar investment objectives and strategies as the prior series.
As one example of a recommended “series-to-series” rollover, Shore’s recommendation that his customer sell the 2013 Q2 Series approximately 17 months prior to its maturity and use the proceeds to purchase the 2013 Q3 Series caused his customer to incur increased sales charges to purchase what was, essentially, the same investment.
Shore’s recommendations caused his customers to incur unnecessary sales charges, and were unsuitable in view of the frequency and cost of the transactions.
By virtue of the foregoing, Shore violated NASD Rule 2310 (for conduct before July 9, 2012), FINRA Rule 2111 (for conduct on or after July 9, 2012), and FINRA Rule 2010.
On top of the suspension, Shore has accepted the imposition of a $5,000 fine.