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FINRA Suspends Ex-Merrill Lynch Rep Scott Matthews: UIT Rollovers
Ex-Merrill Lynch stockbroker Scott Matthews (CRD# 1314735) was recently sanctioned by the Financial Industry Regulatory Authority. The former Merrill Lynch representative was found to have recommended unsuitable unit investment trust (UIT) rollovers to his customers and suspended for three months.
According to a Letter of Acceptance, Waiver and Consent (No. 2018060359901) issued in June 2021, Scott Matthews was registered with Merrill Lynch from October 2009 until December 2020, when the firm disclosed his voluntary resignation. From January 2011 until December 2015, FINRA’s findings state, he “engaged in a pattern of short-term trading” of UIT products in his customers’ accounts. As the AWC Letter explains, UITs are investment companies that allow investors to purchase shares in “a fixed portfolio of securities in a one-time offering.” UITs generally mature on a given date, upon which the securities in their portfolios are sold and investors receive the proceeds of the sale. When representatives recommend their customers sell a UIT prior to its maturity date—which often comes after 15 or 24 months—and purchase a new UIT, they cause the customer to incur higher sales charges than if they had held the UIT until it matured, FINRA states. This is due to the variety of sales charges imposed by UITs.
FINRA’s findings go on to describe how Scott Matthews recommend early UIT rollovers—that is, more than 100 days before the products’ maturity dates—”on approximately 1,800 occasions.” Specifically, he recommended his customers roll over their UITs, which generally had maturity periods of 15 or 24 months, after an average of 262 days. About 330 of the 1,800 early rollovers were “series-to-series” rollovers, according to FINRA, in which he recommended customers use the proceeds generated by the UIT sale to purchase “a later series of the same UIT”—that is, one with the same objectives and strategies as the first. The AWC Letter states that his recommendations of early UIT rollovers caused unnecessary sales charges and were unsuitable for his customers, violating NASD Rule 2310 and FINRA Rules 2111 and 2010. As a result of these findings, FINRA suspended Scott Matthews from associating with any FINRA member firm in any capacity for three months. He was also ordered to pay a fine of $5,000.
According to the Financial Industry Regulatory Authority, Scott Ryland holds 35 years of securities industry experience. His past registrations include Merrill Lynch (Charlotte, North Carolina; 2009-2010), Banc of America Investment Services (Charlotte, North Carolina; 2008-2009), UBS Financial Services (Charlotte, North Carolina; 2000-2008), JC Bradford & Company (New York City; 1985-2000), and Marion Bass Securities Corporation (1984-1985). He presently holds no state licenses. (Information accessed on January 11, 2022.)
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