American Portfolios Sanctioned By FINRA Over UIT Supervision Failures

American Portfolios Financial Services Inc. (CRD: 18487), based in Holbrook, New York, was sanctioned by the Financial Industry Regulatory Authority (FINRA) over its supervision of unit investment trust (UIT) recommendations. The firm joined FINRA in 1987 and operated as a full-service broker before its combination with Osaic Wealth Inc. took effect on October 15, 2024. Here’s what FINRA found and how the matter was resolved.

FINRA Sanctioned American Portfolios Over UIT Supervision

FINRA’s action, Case No. 2023078794701, centered on how American Portfolios supervised recommendations involving unit investment trusts (UITs). The firm consented to a censure, a $400,000 fine, and restitution totaling $1,232,939.09 plus interest. It did so without admitting or denying FINRA’s findings.

FINRA Identified Supervisory Deficiencies At American Portfolios

From January 2018 through October 14, 2024, American Portfolios did not adequately supervise certain recommendations to sell UITs before their scheduled maturity dates, FINRA found. The firm’s controls and procedures did not adequately address the costs and risks of selling UITs early or help supervisors identify brokers who repeatedly recommended early sales followed by purchases of replacement UITs.

Investors generally pay certain UIT charges near the start of an investment. Selling before maturity may leave investors without the full benefit of the UIT, despite having already paid those charges. Reinvesting money from an early sale into another UIT can create additional charges.

Before October 2018, American Portfolios did not have a system specifically designed to flag or review UIT recommendations. That month, it introduced alerts for UIT purchases and sales of $1,000 or more. The alerts did not show how close a UIT was to its scheduled maturity date when it was sold, FINRA found. Supervisors also lacked adequate guidance on how to assess upfront charges and recognize patterns of early sales.

FINRA Found Clients Paid Unnecessary UIT Charges

FINRA examined the recommendations of three representatives. Two worked together, recommending about $42 million in UIT purchases and later advising clients to sell before maturity in roughly 61 percent of cases. FINRA attributed at least $872,960.53 in additional charges to those recommendations, affecting 139 clients.

The third representative recommended about $15 million in UIT purchases and later advised clients to sell before maturity in roughly 78 percent of cases. FINRA attributed at least $359,978.56 in additional charges to those recommendations, affecting 156 clients.

Altogether, FINRA determined that 295 clients incurred $1,232,939.09 in charges it considered unnecessary. It found violations of FINRA Rules 3110 and 2010. FINRA also found violations involving Regulation Best Interest and FINRA Rule 2010 for conduct beginning June 30, 2020.

Seeking Recovery For Losses Involving American Portfolios

Investors who suffered losses involving American Portfolios Financial Services Inc. can contact Soreide Law Group online or call (888) 760-6552 to speak with a securities attorney about possible recovery. Soreide Law Group has recovered losses for investors throughout the United States, works on a contingency fee basis, and advances all costs. American Portfolios consented to the findings in FINRA’s AWC without admitting or denying them.