Broker misconduct is a major problem and a risk for investors who put their hard-earned money into the trust of financial advisors who are supposed to protect their wealth. In 2016, United States Senators Elizabeth Warren (D-Mass.) and Tom Cotton (R.-Ark.) wrote a letter to the financial industry regulatory authority (FINRA) requesting information about what the agency was doing to address adviser misconduct, recidivism and firms that employ a notably large number of brokers with a history of misconduct.
The senators' letter pointed out that according to a 2016 National Bureau of Economic Research (NBER) study, 1 in 13 financial advisors have some sort of misconduct on their record, and one-third of those with a history of misconduct are repeat offenders. In firms that habitually employ brokers with a misconduct history-- usually preying on elderly or less educated investors--one in five advisers was found to have a record of misconduct.
So what can you as an investor do to protect yourself against falling victim to broker misconduct? One thing you can do is to check the FINRA BrokerCheck database. There, you can search for either an individual broker or a firm to see if either has listed "disclosures," which could indicate misconduct such as:
- Firing after an accusation of fraud or investment statute violation
Checking the BrokerCheck database is a good first step if you are concerned about or have suspicions of potential broker misconduct. If you've already lost money because of what you believe to be broker misconduct, it's important to speak with an experienced broker misconduct attorney to learn your rights.