SagePoint Financial, Inc. Sanctioned by FINRA for Failure to Supervise Regarding Suitability of UIT'sPublicly available records provided by the Financial Industry Regulatory Authority (FINRA) indicate that broker-dealer, SagePoint Financial, Inc. (hereinafter “SagePoint”) (CRD # 133763) was recently sanctioned by FINRA’s Department of Enforcement. The sanction occurred as a result of an investigation into its failure to establish and maintain a supervisory system relating to the suitability rules for the early rollover of Unit Investment Trusts (UIT’s). Accordingly, the Law Office of Kevin J. Deloatch, Esq. is interested in speaking to investors who have complaints regarding SagePoint.

Registration Background for SagePoint

SagePoint became a FINRA member in 2005. It is a full-service broker-dealer headquartered in Phoenix, AZ. It currently has approximately 815 branch offices and approximately 1,800 registered representatives.

FINRA’s Allegations against SagePoint

FINRA’s investigation led to SagePoint entering into a Letter of Acceptance, Waiver and Consent (AWC) with FINRA on June 10, 2020. According to the AWC, SagePoint consented to, without either admitting to or denying, the following findings by FINRA’s Department of Enforcement:

  • From January 2013 through December 2017 (the Relevant Period), SagePoint failed to establish and maintain a supervisory system and failed to establish, maintain, and enforce written supervisory procedures (WSPs) that were reasonably designed to supervise the suitability of representatives’ recommendations to customers for early rollovers of Unit Investment Trusts”;
  • During the Relevant Period, SagePoint executed more than $895 million in UIT transactions that generated more than $17.2 million in sales charges”;
    • “The $895 million in UIT transactions included more than $203.7 million in proceeds from transactions in which UITs were sold more than 100 days before their maturity dates and some or all of the proceeds were used to purchase one or more new UITs (early rollovers)”;
  • Approximately $65.8 million of the proceeds were for transactions in which customers sold UITs more than 100 days prior to their maturity dates and used some or all of the proceeds to purchase a subsequent series of the same UIT, which, …, had, in many cases, the same or similar investment objectives and strategies as the prior series (series-to-series early rollovers)”;
  • SagePoint’s WSPs did not discuss early rollovers or series-to-series early rollovers or otherwise provide guidance to firm supervisors about how to monitor for potentially unsuitable patterns of early rollovers or series-to-series early rollovers”;
  • … SagePoint did not use automated reports, alerts, or similar tools to supervise for potentially unsuitable patterns of early UIT rollovers”;
  • … [T]he firm’s review of UIT transactions through its order entry system was not focused on suitability concerns related to early UIT rollovers”;
  • … SagePoint did not identify that firm representatives recommended potentially unsuitable early rollovers, including series-to-series early rollovers, which caused customers to incur $1,315,373.01 in sales charges that they would not have incurred had they held the UITs until their maturity dates” and
  • As a result of the foregoing, SagePoint violated NASD Rule 3010 regarding supervision (for conduct before December 1, 2014), FINRA Rule 3110 regarding supervision (for conduct on and after December 1, 2014), and FINRA Rule 2010” regarding standards of commercial honor and trade.

FINRA Sanctions SagePoint

As a result of such violations and in addition to the above described findings and conclusions, FINRA’s June 10, 2020 AWC also indicates that SagePoint consented to the following sanction(s):

  • A censure;
  • A fine of $300,000; and
  • Restitution in the amount of $1,315,373.01, plus interest.

SagePoint has a History of Complaints

In addition to the findings of FINRA’s Department of Enforcement, FINRA BrokerCheck for SagePoint (pages 67 – 73) reveals it has a history of customer complaints/arbitrations including but not necessarily limited to the following most resent arbitration filings:

  • On January 27, 2014 a customer initiated an arbitration against SagePoint alleging breach of fiduciary duty, misrepresentation, suitability and failure to supervise with regards to an investment in a real estate investment trust (REIT). The customer alleged damages in the amount of $46,624.68. The arbitration resulted in an award against the firm on October 20, 2014, in the amount of $6,121.12.
  • On October 21, 2013 a customer initiated an arbitration against SagePoint alleging breach of fiduciary duty, misrepresentation, failure to supervise, negligence and failure to execute orders, with regards to the handling of their portfolio. The arbitration resulted in an award against SagePoint on April 9, 2015, in the amount of $5,978.50.
  • On April 18, 2013 a customer initiated an arbitration against SagePoint alleging misrepresentation, omission of facts and suitability. The customer alleged damages in the amount of $4,592,832.00. The arbitration resulted in an award against the firm on August 28, 2014, in the amount of $1,462,000.00.
  • On January 1, 2013 a customer initiated an arbitration against SagePoint alleging misrepresentation, omission of facts, failure to supervise and negligence. The customer alleged damages in the amount of $13,250.00. The arbitration resulted in an award against the firm on April 25, 2014 in the amount of $13,250.10.
  • On June 1, 2011 a customer initiated an arbitration against SagePoint alleging breach of fiduciary duty, misrepresentation, suitability and negligence. The customer alleged damages in the amount of $500,000.01. The arbitration resulted in an award against the firm on November 28, 2012, in the amount of $284,162.25.

If you or someone you know has or had a brokerage account with SagePoint Financial, Inc. and have concerns regarding losses in your investments or possible sales practice violations including fraud, you may be entitled to recover lost funds. The Law Office of Kevin J. Deloatch, Esq. has an extensive securities law practice and over 30 years of experience on Wall Street. Call today at (646) 792-2156 for a free consultation. The time to file your claim may be limited so you should call today to avoid delay.