Voya Financial Advisors Inc., Transamerica Financial Advisors Inc. and four other independent broker-dealers failed to give clients appropriate discounts on large sales of nontraded real estate investment trusts and business development companies. In turn, FINRA fined the six over $500,000 combined.
The fines comes as part of FINRA’s crackdown on firms not properly giving their customers particular discounts, called breakpoint discounts.
Discounts are available on sales of particular nontraded REITs, usually when the sale is for more than $500,000. According to a number of prospectuses for nontraded REITs, the price of a REIT is normally ten dollars per share with a seventy cent commission to the broker, but for sales between $501,000 and $1 million, the price can drop to $9.90 per share with the commission falling to sixty cents.
The six firms “failed to identify and apply volume discounts to certain customers’ eligible purchases of non-traded REITs and BDCs, resulting in customers paying excessive sales charges,” according to the FINRA settlements. The firms were also ordered to pay restitution to clients who were overcharged.
The two largest fines were $325,000 for Voya and $85,000 for Transamerica. Voya also was ordered to pay $42,000 in restitution, while Transamerica was ordered to pay restitution of $51,000. The other firms included Investacorp Inc., J.P. Turner & Co., National Planning Corp., and Cetera Investment Services.
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