Frederick Levine, Broker with RBC Capital Markets, Suspended by FINRA Following Allegations of Unsuitable Recommendations

Former customers alleged that they incurred unnecessary sales charges because of Levine’s recommendations.

The Sonn Law Group is investigating allegations that Frederick Levine made unsuitable investment recommendations. If you or a family member has suffered losses investing, we want to discuss your case. Please contact us today for a free review of your case.

frederick-levine-unsuitable-recommendationsFrederick Levine (CRD#: 1765119) is employed as a broker with RBC Capital Markets, where he has been since 2014. On July 21, 2020, Levine signed a Letter of Acceptance, Waiver, and Consent settling alleged violations of FINRA Rules. 

A Unit Investment Trust (“UIT”) is a SEC-registered investment company that offers investors shares or “units” in a fixed portfolio of securities via a one-time public offering. A UIT terminates on specified maturity date, typically after 15 or 24 months, at which point the underlying securities are sold and the proceeds are paid to the investors. The UIT’s portfolio is not actively managed between the trust’s inception and its maturity date.

UITs impose multiple upfront charges. During the Relevant Period, a typical 24-month UIT contained three separate charges: (1) an initial sales charge, which was typically 1% of the purchase price; (2) a deferred sales charge, which was typically 2.5% of the offering price; and (3) a creation and development fee (“C&D fee”), which was typically 0.5% of the offering price. Additionally, most UITs charge annual operating expenses that are paid to the sponsor out of the UIT’s assets.

If a representative recommends the sale of a customer’s UIT before its maturity date and used the sale proceeds to purchase a new UIT, the customer would incur greater sales charges than if the customer had held the UIT through maturity.

According to FINRA, between July 1, 2011, and November 17, 2014 (the “Relevant Period”), Levine allegedly recommended that his customers roll over UITs more than 100 days prior to maturity on approximately 950 occasions. Despite most of his customers’ UITs having maturity periods of 24-months, Levine recommended that they sell their UITs after holding them for, on average, only 260 days, and use the proceeds of the sale to purchase a new UIT.

In an example illustrated by FINRA, Levine recommended that a customer purchase a UIT issued in the first quarter of 2014 that had an investment objective of “above-average capital appreciation” and an investment strategy of investing in a “diversified portfolio of common stocks” (the “2014 Q1 Series”). Despite the UIT having a 24-month maturity period, Levine recommended that the customer sell the UIT after holding it only 77 days, then purchase a later series of the same UIT issued in the second quarter of 2014 (the “2014 Q2 Series”), a UIT with a similar investment objective and strategy, with the proceeds of the sale. This recommendation allegedly caused Levine’s customer to incur increased sales charges to purchase what was essentially the same investment. 

Because Levine’s customers allegedly incurred unnecessary sales charges because of his recommendations, and the unsuitability of the frequency and cost of the transactions, FINRA determined that Levine violated NASD Rule 2310, FINRA Rule 2111, and FINRA Rule 2010.

Levine consented to the sanctions of a three-month suspension from association with any FINRA member firm and a $5,000 fine.

Contact Us Today

The Sonn Law Group is currently investigating allegations that Frederick Levine made unsuitable recommendations. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.