Unit Investment Trusts

Broker Fraud Lawyer Assisting Investors in Los Angeles and Elsewhere in Southern California

Investors place a great deal of trust in their brokers to guide them through the investment process and to help them achieve their financial goals. Many of us must rely on brokers because we lack the sophistication, knowledge, and experience that it takes to navigate the complex and ever-changing financial markets. In some unfortunate scenarios, however, brokers either fail to handle their clients’ portfolios with sufficient care or use an investor’s lack of knowledge as a chance to enhance their personal gain, even if it causes the investor financial losses. A common scenario in which this negligent or reckless conduct occurs involves unit investment trusts, a very specific type of security. At the Law Office of Steve A. Buchwalter, our Los Angeles securities fraud attorney has aided many Southern California investors with seeking justice after they have been burned by their broker.

Understanding Unit Investment Trusts

Often known as a UIT, this type of security is comprised of an entity that issues securities constituting undivided interests in a fixed portfolio of securities. They are typically assembled by a specific sponsor into that grouping, allocated to a trust holding, and then offered for sale publicly. The securities have a specific term length for issuance and are redeemable. Upon an investor’s redemption or termination of the security, they are entitled to recover a pro rata allocation of the UIT’s total net assets. These assets are generally provided during a one-time public offering for a specific and predetermined number of units. Regardless of this trend, sponsors of UITs frequently create a secondary market, which enables the owners of the individual units in the UIT to offer those units for sale back to the sponsor. This in turn extends the opportunity to buy the UITs to other investors. The UIT will terminate at the date specified when it was created. This date can be extremely varied, occurring several decades later or much sooner. The termination date typically is tied to the type of security in the UIT. If the portfolio involves bonds, for example, the termination date will likely be tied to the maturation date of those bonds. There are many fees and costs associated with UITs, including operating expenses, development and creation fees, and sales expenses.

Recovering Compensation from a Broker who Mishandled Your Portfolio

Like all investment vehicles, UITs are not without risks, and it is incumbent on brokers to ensure that their investors understand the risks associated with each potential investment. They should at least verify that the investment opportunity comports with the investor’s financial goals and tolerance of risk. A UIT is not insulated from any market volatility associated with the underlying securities. If the securities in the portfolio suffer losses, the investor will as well.

When it comes to taxes, UITs also raise unique issues that may not fit with every investor’s goals and needs. Since brokers are sophisticated parties, the law places the highest duty of care on them in regard to how they handle a client’s portfolio. If a broker fails to use adequate care, the investor is entitled to recover the difference between the actual value of their account and the estimated value of their account had the broker acted appropriately. Examples of failing to use due care include making decisions that are against the investor’s goals or objectives, and failing to disclose risks associated with an investment to a client. When a broker engages in intentional fraud, deceit, or malice toward an investor, the client may be able to recover additional damages to punish the broker for this egregious level of conduct. A seasoned securities lawyer can help you determine the scope of your legal rights and whether you are entitled to compensation from your broker.

Retain a Los Angeles Attorney to Fight Securities Misconduct

Suffering financial losses and having your portfolio jeopardized by a careless or reckless broker can be a devastating experience. Although it may seem like your financial position is hopeless, there are legal causes of action available that can assist you with recovering the compensation that you need to move forward. As a former stockbroker, Los Angeles lawyer Steve A. Buchwalter has the knowledge and insight that you require to hold your broker responsible. We offer a free consultation to help you learn more about how we can assist you. Our clients are located in Los Angeles, Beverly Hills, Pasadena, Irvine, Newport Beach, Ventura, Santa Barbara, and other areas of Los Angeles, Orange, Santa Barbara, and Ventura Counties. Call us at 1-(818) 501-8987 or contact us online to set up an appointment with a broker negligence attorney.