Former Morgan Stanley And LPL Financial Broker, Ron Willoughby, Sanctioned By FINRA For Short-Term Trading Of Unit Investment Trusts (UITs)
Ron Willoughby was a Financial Advisor at Morgan Stanley in Tempe, Arizona. Ron Willoughby entered the securities industry in 1994 and previously worked at UBS Financial Services. Currently, Ron Willoughby is registered at Kestra Investment Services in Venice, California.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on June 6, 2019, Ron Willoughby was sanctioned by FINRA, suspended from associating with a broker-dealer for three months and fined $5,000. The FINRA sanction arises out of alleged unlawful short-term trading of Unit Investment Trusts (UITs). According to the sanction:
“Willoughby consented to the sanctions and to the entry of findings that he engaged in an unsuitable pattern of short-term trading of Unit Investment Trusts (UITs) in customer accounts. The findings stated that Willoughby recommended that his customers roll over a UIT before its maturity date in order to purchase a subsequent series of the same UIT, which generally had the same or similar investment objectives and strategies as the prior series. Willoughby’s recommendations caused his customers to incur unnecessary sales charges and were unsuitable in view of the frequency and cost of the transactions.” It was further alleged that there were more than 900 short term trades of UITs.
For a copy of the FINRA sanction, click https://www.finra.org/sites/default/files/fda_documents/2017055692301%20Ron%20Ray%20Willoughby%2C%20Jr.%20CRD%202425926%20AWC%20jm.pdf.
A Unit Investment Trust is a closed-end investment company typically issues redeemable securities (or “units”), like a mutual fund, which means that the UIT will buy back an investor’s “units,” at the investor’s request, at their approximate net asset value (NAV). A UIT typically will make a one-time “public offering” of only a specific, fixed number of units (like closed-end funds). Many UIT sponsors, however, will maintain a secondary market, which allows owners of UIT units to sell them back to the sponsors and allows other investors to buy UIT units from the sponsors.
A UIT will have a termination date that is established when the UIT is created, although it may be in the distant future. In the case of a UIT investing in bonds, for example, the termination date may be determined by the maturity date of the bond investments. When a UIT terminates, any remaining investment portfolio securities are sold and the proceeds are paid to the investors.
A UIT does not actively trade its investment portfolio. That is, a UIT buys a relatively fixed portfolio of securities (for example, five, ten, or twenty specific stocks or bonds), and holds them with little or no change for the life of the UIT. Because the investment portfolio of a UIT generally is fixed, investors know more or less what they are investing in for the duration of their investment. Investors will find the portfolio securities held by the UIT listed in its prospectus.
In addition to the FINRA sanction, Ron Willoughby has been the subject of three customer complaints, alleging sales practice violations. Among the complaints include the following:
- October 2017—“Customer alleged unsuitable investments.” The matter was resolved for $33,000.
- October 2008—”CUSTOMERS ALLEGE THAT DURING 2006 THROUGH 2008 FINANCIAL ADVISOR PURCHASED VOLATILE SECURITIES WHEN CUSTOMERS REQUESTED CONSERVATIVE INVESTMENTS FOR THEIR RETIREMENT. DAMAGES UNSPECIFIED.” The matter was settled for $87,500.
- January 1999—”CLIENTS ALLEGE UNAUTHORIZED TRADE ON SALE OF 4,800 INTC ON 11/6/98. REQUESTING REIMBURSEMENT OF $96,000.”
For a copy of Ron Willoughby’s CRD, click https://brokercheck.finra.org/individual/summary/2425926#disclosuresSection.
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
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