U.S. FINRA Fines Morgan Stanley UITs

 FINRA settles with Morgan Stanley for $13mn re UITs.

  • Morgan Stanley charged re failure to supervise sale of unit investment trusts UIT.

Suitability Concerns

  • UIT is investment company offering portfolio units terminating on a specific date.
  • Impose deferred sales charge and a creation and development fee, can be 3.95%.
  • A representative who repeatedly recommends customer sell UIT before maturity,
    and then “rolls over” funds into a new UIT causes a customer higher sale charges.
  • Thus, short-term trading of UITs may be improper, and raises suitability concerns.

Alleged Violations

  • In 2012-2015, hundreds of firm representatives executed short-term UIT rollovers.
  • Including UITs over 100 days before maturity, for thousands of customer accounts.
  • Firm failed to supervise representatives' sales, and provided insufficient guidance
    on how supervisors review UIT trades, to detect any unsuitable short-term trading.
  • Did not implement adequate systems to detect short-term UIT rollovers; failure to
    provide supervisory review of rollover prior to execution in the trade entry system.
  • Firm did not provide training to registered representatives on specific UIT features.


  • Firm to pay $3.25mn fine and $9.78mn restitution to over 3,000 affected customers.