The Louisville-based money management firm Hilliard Lyons has agreed to pay out more than $500,000 as part of a financial industry fine and repayment plan to bilked investors.
The firm, one of the oldest in the country, will pay a $175,000 fine and refund $328,491 to customers who were billed for excessive sales charges between 2009 and 2014.
The punishment was administered by FINRA, the securities industry’s self-policing organization in Washington, D.C. Hilliard Lyons agreed earlier this month to the findings and punishment in a letter of acceptance, waiver and consent.
According to the letter, Hilliard Lyons “failed to apply sales charge discounts” toward the purchase of so-called unit investment trusts by an unspecified number of buyers. Most often, FINRA said, discounts are applied when investors do “rollovers” or “exchanges” within their trusts.
Unit investment trusts consist of a “relatively fixed portfolio of securities” deposited in a trust and sold in units to the public, FINRA said. They typically contain stocks and bonds and generate capital appreciation or dividend income, or both, over a specified term.
Wes Ringo, Hilliard Lyons’ chief compliance officer, said the company cooperated with the investigation and has taken steps to avoid further overcharges.
“We actually put in a new system to make sure that these rollover transactions receive the correct charge,” he said. “The policies and procedures were fine. It’s just that the system we used was malfunctioning. The system charged a commission, but it charged a regular commission. It did not give a discount.”
Just four months ago, the U.S. Securities & Exchange Commission fined Hilliard Lyons $420,000 for “offering and selling municipal securities on the basis of materially misleading disclosure documents.” The company agreed to stop violating that provision of the Securities Act of 1933.
Hilliard Lyons has more than 70 offices in 12 Midwestern and Southern states.
FINRA did not respond a request for comment.
Reporter James McNair can be reached at firstname.lastname@example.org and (502) 814.6543.