Broker Fined $1.6M for Churning Clients in High-Fee Investment Products

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FINRA, the self-regulatory body that oversees broker-dealers, fined American Portfolios Financial Services about $1.6 million — including over $1.23 million in restitution plus interest and a $400,000 fine — for failing to catch representatives who repeatedly pushed clients to sell unit investment trusts (UITs) early and buy new ones. UITs are fixed portfolios of securities that typically mature in 15 to 24 months and carry significant upfront charges; selling before maturity means those charges may never be recouped, and buying a replacement UIT layers on another round of fees. Three named reps were cited: two working as a team recommended early UIT sales about 61% of the time, costing 139 customers nearly $873,000 in unnecessary charges, while a third recommended early sales about 78% of the time on roughly $15 million in UIT purchases.

The conduct ran from 2018 through October 2024, and FINRA found that American Portfolios' supervisory systems — though they required suitability reviews — lacked enough detail to flag the pattern. The case is part of a long-running FINRA focus on UIT sales practices; past enforcement actions have reached Morgan Stanley ($13 million), Raymond James ($15 million from the SEC), and several others. Readers who hold UITs or whose broker has recommended rolling out of one UIT into another should ask whether the new purchase serves their interest or primarily generates fees for the adviser.