A unit investment trust (UIT) is a company that sells unit shares of itself to investors. Essentially, when an investor buys a unit share of an UIT, he or she is buying into a basket of securities that contains a mix of bonds, stocks or other kinds of investments.
Since UITs are “redeemable,” the investor can liquidate units at any time. However, depending on the market value of the UITs, the investor could suffer gains or losses at the time of liquidation. Furthermore, the investor could incur penalties for liquidating UITs before their date of termination.
How Unit Investment Trusts Happens
Conservative investors and retirees need to be cautious when it comes to unit investment trusts (UITs) because some are much riskier than others. The problem is, investment advisors often “gloss over” these risks when selling UITs to customers, which is causing significant and unnecessary UIT investment losses.
When an FINRA-registered broker recommends and sells any kind of investment without fully educating the customer about the risks associated with the investment, it could be a violation of the law.
If you didn’t know what you were getting into and lost your hard-earned money because of bad UIT recommendations, you might be able to get your money back. Contact the Consumer Investor Resource Center to learn about your legal rights and options regarding UIT investments losses. Also, we encourage you to browse the frequently asked questions below to learn more about unit investment trusts
Many stockbrokers push high risk and illiquid REITs onto retirees and conservative investors for the sole purpose of generating commissions and fees for themselves without any regard for the welfare of their clients.
Wall Street brokerage firms also profit heavily from the sale of non-traded REITs. In fact, your brokerage firm might have pressured your stockbroker into selling these inappropriate investments to you.
Bringing Unit Investment Trusts Perspective
Unit investment trusts can be confusing for investors because they come in different forms, and – depending on the investments they contain – the might not be appropriate for a given investor’s needs. Sometimes brokers recommend the wrong UIT for the job, and this can cause a naive investor to lose thousands of dollars.
In most cases, a UIT will be one of the following two types:
- Fixed Income UITs: Fixed income UITs are intended to generate investors a constant and reliable income for the time period of the investment. These UITs tend to be primarily comprised of bonds. As such, they may be attractive investments for retirees who want a safe and reliable income to finance their retirement. However, just because it’s a “fixed income UIT” does not actually mean it’s safe.
- Equity UITs: Equity UITs are targeted toward a specific stock-based investment strategy. Some might target energy stocks, some might target real estate stocks, and others might target technology stocks – or another sector. Because they tend to be highly focused on stocks in one economic sector, equity UITs are riskier than fixed income UITs, and they’re rarely appropriate for those looking for safety and security.
Discovering the Fraud
If an investment firm recommended the purchase of UIT units, and you lost money, you might be able to seek financial compensation for your losses.
Stockbrokers that recommend UITs generally have a fiduciary obligation to their customers. This means that they have to “know their customer” – i.e., the customer’s needs, life situation, investment experience, age, stated investment goals – and what kinds of investments are in the customer’s best interests.
Furthermore, an investment advisor’s fiduciary obligation requires the advisor to recommend suitable investments in accordance with the goals, life situation, and other information that the broker is obliged to know about the customer.
If an FINRA-registered advisor violates his or her fiduciary obligation to the customer by recommending unsuitable investments, the advisor and the employing investment firm can be held liable for the customer’s resulting financial losses. If you or a loved one has been hurt by unsuitable UIT recommendations, call the Consumer Investor Resource Center or send us an email. We will listen to your story and advise you of your legal rights and options.
Know Your Rights
The Financial Industry Regulatory Authority (FINRA), which holds stockbrokers and brokerage firms accountable for unsuitable investment advice and fraud. FINRA’s warnings clearly state that these investments contain hidden risks and liquidity problems, making them inappropriate for unsophisticated, conservative and/or long-term investors.
Do you suspect that your stockbroker fraudulently or negligently recommended non-traded UITs to you?
Try and Get Your Money Back
If you lost money because your stockbroker inappropriately bought bad UITs or because he failed to disclose the true risks involved with UITs, you can make a claim for damages and try to get your money back.
The financial injuries resulting from investment fraud can be crippling, but the realization your stockbroker neglected your account or purposefully lied to you can be overwhelming. If you have fallen victim to this kind of fraud, it’s important to remember this is not your fault!
Pursuing a stock fraud claim will teach big banks and Wall Street brokerage firms that it’s unacceptable to prey upon innocent consumers and completely disregards their best interests and needs. Your claim may even prevent others from suffering as you have by forcing Wall Street brokerage firms to conduct business with honesty and integrity.
Contact Us
You may be eligible to receive compensation regardless of whether you sold or continue to hold the UITs at issue. Contact us today to set up a free consultation. We will listen to your story, answer any questions you may have, and discuss your legal rights and options.