The Financial Industry Regulatory Authority on Thursday said it ordered SunTrust Banks Inc. to pay $1.4 million to resolve charges related to certain transactions involving 17 mostly elderly and/or disabled customers.
Finra said that SunTrust, through two brokers in the firm's Maryland region, engaged in a pattern of "unsuitable" short-term unit investment trust, closed-end fund and mutual fund transactions for the customers. The brokers also allegedly engaged in unsuitable margin transactions in the accounts of 10 of those customers.
A spokesman from SunTrust declined to comment.
As part of the settlement, the Atlanta regional bank must also review all UIT purchases and provide remediation to all eligible customers who didn't receive the maximum sales charge discount.
Finra had previously sanctioned one of the brokers involved in Thursday's matter, David Bredenburg of Timonium, Md., permanently barring him from working in the securities industry. Finra has filed a complaint against a second unnamed broker, charging him with a number of violations and suspended the two brokers' former supervisor, Donald Mattran of Bel Air, Md., for six months.
Finra alleged the two brokers recommended that customers sell the transactions less than one year - and in come cases one month - after purchasing the securities at the broker's recommendation, with little or no benefit to the customers. Finra further found that SunTrust, through the brokers, recommended that 10 of the customers engage in purchases and sales of securities on margins - failing to adequately disclose the risks and costs associated with those trades. As a result, the customers paid over $133,000 in margin interest.
In concluding these settlements, SunTrust, Bredenburg and Mattran neither admitted nor denied the charges but consented to the entry of Finra's findings. The allegations against the second broker are still pending.
Of the $1.4 million fine, $900,000 includes the disgorgement of commissions earned on the trades and restitution to the 17 customers who incurred losses.
Earlier Thursday, SunTrust reported it rebounded from a prior-year loss caused by increased credit costs, as it reported lower loan-loss provisions. The company serves an area that was particularly hard-hit by the real estate crash and had been posting losses since the start of the financial crisis, though credit trends have been improving lately.
SunTrust's shares were recently up 8.6% to $24.35, rising with a number of regional banks that continue to report stronger-than-expected results as fewer losses from bad loans continue to lift profits.