broker misconduct

The Financial Industry Regulatory Authority (FINRA) maintains a public database, called BrokerCheck, which acts as a free tool for investors looking to research the backgrounds of FINRA registered personnel. BrokerCheck covers brokerage firms, brokers, investment adviser firms and representatives. Searches allow investors to draw upon filings by firms, regulators, and other investment professionals, to reveal licensing status and history, employment history, and any reported regulatory infraction, customer dispute, criminal actions, financial issues, and other related matters.

These black mark events, revealed by BrokerCheck, are known as “disclosure events” and are often viewed as red flags by investors and the industry. Advisers and brokers who have marred records with multiple events carry inherent regulatory risk. As a consequence, most of the elite broker dealers and advisory firms will shy away from hiring representatives with such backgrounds.

Enter Meyers Associates, L.P.

The Financial Industry Regulatory Authority (FINRA) sanctioned brokerage firm Cambridge Investment Research, Inc. concerning allegations that from January 2009, to July 2010, Cambridge failed to ensure that the firm preserved, maintained, and reviewed the business emails of two of its registered representatives. FINRA found that during this time Cambridge was relying upon its representatives to forward copies of their emails but did not have effective procedures reasonably designed to ensure that the representatives actually forwarded emails in violation of FINRA supervision rules.

Cambridge has been a FINRA member since December 1995 and has 3,044 registered individuals in 1,530 branch offices.

The duty to supervise has been held to be a critical component of the securities regulatory scheme. Supervisors have an obligation to employ systems and processes designed to ferret out wrongful behavior. In addition, firms must respond vigorously to indications of irregularity, commonly referred to as “red flags” of misconduct.

Articles Tagged with broker misconduct

Meyers Associates: Black Marks and Red Flags

FINRA Alleges that Cambridge Investment Research Failed to Supervise Broker Emails