The Financial Industry Regulatory Authority (FINRA) fined First Trust Portfolios L.P. USD 10 million for providing excessive non-cash compensation, including gifts, meals and entertainment, in connection with the distribution of First Trust investment company securities and for related misconduct including misleading client firms. Between at least 2018 and February 2024, First Trust wholesalers provided retail broker-dealer representatives with non-cash compensation that FINRA said significantly exceeded Rule 2341 limits and, in some cases, was conditioned on meeting sales targets for First Trust products such as exchange-traded funds and unit investment trusts. FINRA cited instances including more than 25 occasions where two wholesalers provided courtside basketball tickets costing about USD 3,200 per pair, and an 18-month period in which one representative received more than 20 concert and sporting event tickets valued at over USD 31,000. Wholesalers also falsified internal expense records relating to more than USD 650,000 in non-cash compensation, while reports sent to client firms contained inaccurate information and omitted more than USD 500,000 of gifts, meals and entertainment; FINRA also found supervisory and expense-related recordkeeping failures. Under the settlement, First Trust consented to FINRA’s findings without admitting or denying the charges and agreed to provide annual compliance certifications to FINRA for three years on the issues identified.

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