The Financial Industry Regulatory Authority (FINRA) has fined Cetera Advisor Networks, Cetera Advisors, and Cetera Financial Specialists $1 million, following allegations that Cetera failed to supervise its representatives. FINRA requires that firms supervise their registered representatives to ensure that they only recommend financial products that suit their customers’ needs. On December 9, 2020, Cetera entered into an Acceptance, Waiver, and Consent (AWC) agreement with FINRA following allegations that Cetera did not maintain reasonable supervision. An AWC agreement allows the firm to consent to the findings, without admitting to nor denying the findings.
According to FX News Group, these allegedly unsupervised Cetera representatives managed $80 billion in customer assets across 47,000 accounts. Cetera has thousands of branch offices, with headquarters in California, Colorado, and Illinois. With so much money at stake, Cetera should have taken steps to make sure they had clear supervisory procedures in place.
What is a “Duty to Supervise”?
FINRA’s “duty to supervise” includes supervising investment recommendations of dually registered investment advisors (RIAs), who are simultaneously registered as fiduciary RIAs and broker-dealers. (What is the difference? RIAs have an obligation to work in their client’s best interests when they recommend securities, while broker-dealers act as an intermediary between their clients and the stock exchange and have to meet the less-strict requirements of Regulation Best Interest.) These supervision rules include a requirement for the firm to maintain written supervisory procedures (WSPs).
The representatives mentioned in the settlement held dual registrations – meaning they were registered with both Cetera and another investment advisor. An “Investor Advisor” could refer to another advisory firm. Cetera has the duty to supervise all of their registered representatives’ activity, even the business they conduct with outsides RIAs.
The SEC Previously Identified Failures
SEC examinations had identified Cetera’s alleged failures to supervise in 2013, 2015, and 2017. Cetera had even initiated a project to obtain the information needed to supervise the securities transactions that their registered representatives conducted with other advisory firms. These efforts allegedly proved ineffectual. According to the AWC, these supervisory deficiencies also caused the firm to fail to preserve appropriate records, another violation of FINRA rules.
What Can I Do Next?
You should review your investments for any losses that may have occurred due to Cetera’s failure to supervise. Call (877) 238-4175 or email firstname.lastname@example.org to speak with one of the experienced securities attorneys at Fitapelli Kurta. They offer free case evaluations and can help you decide if you should pursue a claim.