Watch Out Investors—FINRA May Not Be Protecting You from Unscrupulous Brokers

Investors often hire a financial advisor to manage their money professionally because they lack the knowledge themselves and trust that their advisor will act in their best interest and uphold the industry rules and regulations set forth by the Financial Industry Regulatory Authority (FINRA), lest they be disciplined or even barred from the financial industry.  Unfortunately, as Senator Elizabeth Warren (D-Mass) writes in a letter she and Sen. Tom Cotton (R-Ark) sent to the chairman of FINRA, Richard G. Ketchum, “…FINRA is not doing nearly enough to fulfill its investor protection mission.” A recent study of data from FINRA’s BrokerCheck database, conducted by the National Bureau of Economic Research (NBER), concluded that financial advisor misconduct is “broader than a few heavily publicized scandals” and that “one in thirteen financial advisers have a misconduct-related disclosure on their record” (See  Financial advisor misconduct disclosures include such things as bribery, forgery, and fraud.  The NBER study noted that only about half of the advisors who committed misconduct lost their job and 44% of those obtained a job at a different broker dealer within one year.  One of the more disturbing findings of the NBER study is that approximately one-third of all financial advisors with misconduct records are repeat offenders.

Continue Reading