FINRA orders American Portfolios to pay $1.6 million over UIT failures

FINRA has ordered American Portfolios, the broker-dealer unit acquired by the entity now operating as Osaic, to pay $1.6 million combined in restitution and fines for reported failures to supervise representatives who repeatedly recommended clients sell unit investment trusts before maturity.

The settlement – which includes $1,232,939 in restitution, plus interest, to nearly 300 customers, and a $400,000 fine – was disclosed in a letter of acceptance, waiver and consent dated August 31 and made public Tuesday morning, closing out a supervisory failure that regulators say stretched for more than half a decade.

The latest order adds to FINRA's history of cracking down on shortfalls around UIT sales. After a 2016 sweep of the industry, the regulator issued stiff penalties to member firms in succeeding years, including a $1.1 million hit for Cetera in 2017. In 2020, FINRA also issued fines against SagePoint Financial, another entity later absorbed by Osaic; and Stifel, which faced a hefty $3.6 million in sanctions.

According to FINRA's latest settlement on Tuesday, American Portfolios customers purchased approximately $470 million in UITs from January 2018 through October 2024, but the firm never built a system for flagging representatives whose recommendations pushed clients out of the products early.

Three registered representatives were flagged in the case. Two who worked as a team recommended early UIT sales roughly 61% of the time, with affected customers holding the investments for only half their term lengths on average; a third rep reportedly recommended early sales in about 78% of transactions.

All told, FINRA found 295 investors were caused to pay unnecessary sales charges that will now be returned, with individual restitution amounts ranging from $102.27 to $399,055.29.

Based on FINRA's investigation, American Portfolios' written supervisory procedures required reviewers to assess whether UIT recommendations were suitable, but gave them no actual method for doing so.

The firm purportedly had no system at all to flag early UIT sales until October 2018, when it introduced trade alerts for UIT transactions above $1,000 in principal value. Even then, those alerts did not tell reviewers how close to maturity a UIT had been redeemed, leaving supervisors with no way to catch representatives who were churning clients, encouraging repeated early sales and reinvestment in new UITs carrying fresh sales charges.

"Protecting investors and ensuring market integrity is central to FINRA's mission, and this action will return more than $1.2 million to customers who paid unnecessary costs," said Bill St. Louis, Finra's executive vice president and head of enforcement.

He added that "member firms have a clear obligation to supervise their representatives' product recommendations, including identifying patterns that appear to cause customers to incur unnecessary costs."

American Portfolios was a fixture in the independent broker-dealer channel for decades before Advisor Group agreed to acquire the Long Island-based firm in 2022, a deal that brought roughly 850 advisers managing close to $40 billion in client assets into the larger network.

Advisor Group itself rebranded as Osaic the following year, consolidating eight separate broker-dealers under one name and platform. American Portfolios was formally merged into Osaic Wealth Inc. in October 2024

American Portfolios settled without admitting or denying FINRA's findings. An Osaic spokesperson said the firm has agreed to the terms of the settlement, emphasizing that the matter in question occurred prior to American Portfolios' integration into Osaic.

"Osaic Wealth's supervisory policies and procedures were not the subject of this investigation," they said. "We are glad to put this matter behind us."