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Former Morgan Stanley Broker Fined, Suspended Over UITs

By Garrett Keyes June 11, 2019

A former Morgan Stanley broker, Ron Ray Willoughby Jr., has been fined $5,000 by Finra and ordered suspended for three months to settle a case involving unit investment trusts.

The self-regulator has alleged that Willoughby engaged in “unsuitable” rollovers of UITs that caused customers to “incur increased sales charges to purchase what was, essentially, the same investment.”

Willoughby agreed to the sanctions without admitting or denying Finra’s findings.

According to Finra’s findings, Willoughby recommended his customers roll over UITs more than 100 days prior to maturity on more than 900 occasions.

Although Willoughby’s customers had UITs that generally had 15- or 24-month maturity periods, the broker recommended they sell their UITs after holding them for an average of only 191 days, and use the proceeds to purchase a new UIT, according to Finra’s findings.

The UIT rollovers cited by Finra took place from July 2012 to December 2014, while Willoughby was at Morgan Stanley. Willoughby left Morgan Stanley in December 2016.

Willoughby is currently registered at Kestra Investment Services. Before that, he was with LPL Financial from 2016 to 2018, according to his BrokerCheck profile. Willoughby has three other disclosure events involving customer disputes – two involved investments and were settled and one involved a trade and was denied – from 1999 to 2017 in his records.

UITs are investment companies registered with the SEC that offer shares or units in a fixed income portfolio of securities via a one-time public offering to investors. UITs terminate on a specified maturity date, often after 15 or 24 months, at which point the underlying securities are sold and the resulting proceeds are paid to the investors, according to Finra.