New Jersey General Securities Representative Agrees to FINRA Sanctions for Series-to-Series Rollovers and other Unsuitable UIT Trading RecommendationsTuesday, September 15, 2020
On September 1, 2020, the Financial Industry Regulatory Authority (FINRA) Department of Enforcement approved a Letter of Acceptance, Waiver and Consent (AWC) submitted by Michael Rubel, a general securities representative currently associated with B. Riley Wealth Management in Red Bank, New Jersey, to resolve allegations of securities industry violations.
Rubel has been associated with Merrill Lynch, Pierce, Fenner & Smith Incorporated (June 2005 – August 2008), Wells Fargo Advisors, LLC (August 2008 – June 2015), and Capitol Securities Management, Inc. (June 2015 – February 2020). All firms are located in Red Bank, New Jersey.
According to the AWC, Rubel allegedly engaged in an unsuitable pattern of short-term trading of Unit Investment Trusts (UITs) in customer accounts between June 12, 2015 and March 15, 2017 while associated with Capitol Securities Management.
A UIT is an investment company registered with the Securities and Exchange Commission (SEC) that provides a one-time public offering of a fixed portfolio of securities that terminates on a specified maturity date (usually 15 or 24 months). Once the UIT reaches the maturity date, the underlying securities are sold and the resulting proceeds are paid to the investors. UITs are often sold in “series” in which a new but similar fixed portfolio coincides with the maturity date of the previous offering. However, if UITs are sold before the maturity date and the sale proceeds are used to purchase a new UIT, the investor would incur greater sales charges than if the investor had waited to sell after the maturity date.
On approximately 276 occasions, Rubel allegedly recommended that some of his customers roll over UITs more than 100 days before the maturity dates. He recommended to certain customers that they not only sell the UITs before maturity but also use the proceeds to purchase a new UIT (known as “series-to-series” rollovers). FINRA asserts that his recommendations were unsuitable due to the frequency and cost of the transactions and caused his customers incurred unnecessary sales charges.
Based on the foregoing, Michael Rubel violated FINRA Rules 2111 and 2010. Without admitting or denying the allegations made against him, Rubel consented to a suspension for 45 calendar days. He submitted a sworn financial statement demonstrating his inability to pay any fines or fees, thus FINRA did not impose monetary sanctions.
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