A Registered Principal with SunTrust Investment Services, agreed to settle FINRA charges that he churned customer accounts using trusts and fund investments.

For most of 2004 through 2006 ("relevant period") Uzo Chima, a Baltimore-based broker, engaged in a pattern of unsuitable short-term trading and switching of UITs, CEFs (Closed-End Funds), and mutual funds in accounts owned by 7 retired and/or disabled customers.  Each account repeatedly sold such securities within a year of their purchase. 

FINRA (then NASD) further found that: 

• In 3 of the 7, Chima effected unsuitable transactions, including purchasing UITs on margin. 
• In nearly 30 customer accounts - including each of the above 7 accounts, Chima purchased UITs without ensuring that customers received the maximum sales charge discount. 
• Chima engaged in unauthorized discretionary trading.
• Chima falsified customer account update documents for 3 accounts.
• Chima mismarked trade tickets for each of the above 7 customer accounts.

It turns out that the above 7 customers had maintained brokerage accounts with Chima before he came over to STIS.  Each was an unsophisticated investor whose new account form listed conservative and/or moderate risk tolerances.  That didn't stop him from pursuing a similar investment strategy in each
account - i.e., repeatedly recommending that each customer buy positions in UITs and CEFs and then sell them less than one year after being purchased,  Chima often employed the practice of "switching," whereby he sold one UIT or CEF and invested a portion of the sale proceeds in other UITs or CEFs. 

Transactional Details:  During the relevant period, he recommended 97 short-term UIT transactions, 52 short-term CEF transactions, and one short-term mutual fund transaction in the 7 customer accounts, including 48 short-term transactions in 1 customer's account.  He further recommended to 3 of them unsuitable purchases and sales of securities including UITs on margin, which generated 6-figure margin balances and significant margin interest. 

Chima engaged in discretionary trading without prior written authorization, falsified customer account update documents and mismarked trade tickets for each of the customers’ accounts, stating that the orders were unsolicited when, in fact, they were solicited. The findings also included that the transactions generated approximately $450,000 in commissions for Chima and his firm, and approximately $370,000 in losses to the customers; some customers also paid over
$75,000 in margin interest.

In numerous UIT purchases, none of which exceeded $250,000, Chima failed to apply the rollover discount to which each customer was entitled.  Chima also caused his member firm’s books and records to be false in material respects, in that he provided false information on customer update forms for customers’ accounts, signed the forms certifying that they were accurate and
submitted them to his firm. 

FINRA Sanctions.  Chima was fined $75K, suspended for 2 years, and ordered to pay $12K plus interest in restitution to customers.  This is FINRA Case #2006007105101.  [C-I Note:  The numbers appear to be a mockery, when compared with the costs incurred by all customers'.]

For further details, go to:   [FINRA AWC, 4/13/11]