Investor attorneys at Mika Meyers, PLC are interested in talking to customers of Merrill Lynch stock broker Vincent Sciabica of Albany, New York. Sciabica was recently fined and suspended by the Financial Industry Regulatory Authority after an investigation led the regulator to find that Sciabica had engaged in an unsuitable pattern of short term trading of Unit Investment Trusts in 359 customer accounts.
UlTs are investment companies that offer shares of a fixed portfolio of securities for a fixed investment period. They typically carry significant upfront sales charges. Due to these characteristics, short-term trading of UITs is generally improper. Despite this, Sciabica allegedly advised his clients to liquidate positions in UITs well before the UITs had reached maturity and to use the proceeds to purchase similar UITs. The sales charges on these transaction ranged from 1.95% to 3.95%. According to FINRA, the transactions were unsuitable in view of the frequency and cost of the transactions.
Investment company “churning” or “switching” has been a problem for years. In the 90s, FINRA’s predecessor, the NASD, issued a Notice to Members (NTM 94-16) admonishing its member firms that switch recommendations that do not lead to a “net investment advantage to the investor” are unsuitable. In a more recent case dealing with investment company switching, FINRA stated that absent compelling evidence, “a pattern of . . . switches is not reconcilable with the concept of suitability.” Dep’t of Enforcement v. Epstein, Complaint No. C9B040098, 2007 FINRA Discip. LEXIS 18, at *67-68 (FINRA NAC Dec. 20, 2007). The burden is on the broker “to demonstrate the unusual circumstances which justified” a recommended switch. Epstein, 2007 FINRA Discip. LEXIS 18, at *67 (internal quotations and citations omitted).
If you have suffered investment losses as a result of UIT switching or churning by Vicent Sciabica, the law firm Mika Meyers, PLC may be able to assist you in recovering some or all of your losses. Contact investor claims attorney Dan Broxup of Mika Meyers, PLC for a free, no-obligation consultation.