Broker-Dealers are Failing to Supervise Rogue Brokers
William Galvin, Massachusetts Secretary of the Commonwealth, released a report titled “Massachusetts Securities Division’s Sweep of Select Broker-Dealers that Hire Bad Agents.” The report indicates that while broker-dealers are conducting more background checks due to FINRA Rule 3110(e), 18.13% of the total agents hired had Disclosure Incidents. More troubling, the report found that the vast majority of the agents with Disclosure Incidents who were hired were not placed on heightened supervision. There were 8,584 agents hired with Disclosure Incidents, of which only 6.03% were placed on heightened supervising, leaving 1,925 of the agents not subject to heightened scrutiny.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Due Diligence Requirement
FINRA requires brokerage firms to conduct due diligence on investments and to conduct a suitability analysis when recommending securities to a customer that takes into account the customer’s knowledge and experience. FINRA Rule 2111(a) states that “a member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.”
Rule 2111 is composed of three main obligations: reasonable-basis suitability, customer-specific suitability, and quantitative suitability. Brokerage firms that fail to conduct adequate due diligence on investments they recommend or that make unsuitable recommendations can be held responsible for the customer’s losses in a FINRA arbitration claim.
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
Request a Free Consultation with a Securities Attorney
If you suffered losses and would like a free consultation with a securities attorney, then please call Galvin Legal, PLLC at 1-800-405-5117.
This information in Broker-Dealers are Failing to Supervise Rogue Brokers is all publicly available and is being provided to you by Galvin Legal, PLLC.
Galvin Legal, PLLC is a national securities arbitration, securities mediation, securities litigation, securities fraud, securities regulation and compliance, and investor protection law practice. For more information on Galvin Legal, PLLC and its representation of investors, please visit www.galvinlegal.com or call 1-800-405-5117.
