FINRA Orders Massachusetts Firm, Investors Capital Corp, to Pay Restitution to Clients

Soreide Law Group obtained the following information from FINRA’s website under, “Disciplinary and Other FINRA Actions, December 2016:
Investors Capital Corp (CRD #30613, Lynnfield, Massachusetts)

was censured, fined $250,000 and required to pay $841,532.97 in restitution, which includes interest to clients. Investors Capital Corp has already paid approximately $224,500 in restitution to affected customers in addition to the restitution amount ordered. Without admitting or denying the findings, the allegations were that through certain of its registered representatives, Investors Capital recommended unsuitable short-term trading of unit investment trusts (UITs) and steepener* notes in client accounts.
FINRA’s findings stated the recommendations to purchase and sell UITs on a short-term basis were made without reasonable grounds for believing that such recommendations were suitable in view of the frequency, size and cost of the transactions and as a result the firm’s clients suffered losses in the amount of approximately $242,892.
According to FINRA, the registered representatives did not have reasonable grounds for believing that the short-term trading in steepeners* was suitable in light of the frequency and size of the transactions, and each client’s investment objectives, financial situation and needs. In total, these unsuitable steepener* recommendations resulted in the clients suffering losses of approximately $125,765.
FINRA’s findings stated that Investors Capital Corp failed to identify and apply sales charge discounts to certain clients’ eligible purchases of UITs, resulting in clients paying excessive sales charges of approximately $472,876.
Also, FINRA’s findings alleged that the firm failed to establish an adequate supervisory system to ensure that its representatives made suitable UIT and steepener recommendations to clients. Investors Capital Corp failed to sufficiently train its representatives regarding the risks, features, and costs of UITs and steepeners.
Investors Capital Corp, according to FINRA did not adequately monitor the length of time these products were held in clients’ accounts. Allegedly, the firm did not have an adequate supervisory system.
(FINRA Case #2013035035901)
*According to the financial definition a “steepener” is described as a type of interest rate swap in which the floating rate leg is derived from the difference between long and short-term interest rates, and this tool is often called a “curve steepener.” The difference between long and short rates is usually multiplied by 10, 20, or even 50 times. An investor’s returns are positively proportionate to the difference between the two rates. The steeper the curve, the greater the difference between long and short term rates, the higher the return earned by the holder.
If you were a client of Investors Capital Corp. of Lynnfield, MA, and suffered losses due to their actions or recommendations, call Soreide Law Group for a no-cost consultation with an attorney at:  888-760-6552.
Soreide Law Group represents our clients throughout the nation before FINRA and we operate on a contingency fee basis.