FINRA Fines Cetera $1 Million for Failure to Supervise Private Securities Transactions in Client Accounts

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Updated on: February 26, 2021

FINRA recently disclosed that Cetera Advisor Networks LLC, Cetera Advisors, LLC and Cetera Financial Specialists, LLC, (Cetera Firms) agreed to an Acceptance, Waiver and Consent (AWC) Case #2015046716901.  The Cetera Firms were fined $1 million and were ordered to review and revise, their systems, policies and procedures with respect to the supervision of “private securities” transactions in client accounts, for brokers who were dually-registered.

According to FINRA, “From January 2011 through December 2018, Networks and Advisors, and from November 2012 through January 2018, Specialists (the relevant time periods) each failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to supervise certain private securities transactions conducted by their dually-registered representatives (DRRs) at unaffiliated or “outside” registered investments advisors (RIAs).”  Furthermore, the FINRA AWC states in 2018, these dually-registered representatives “managed more than $80 billion in customer assets across more than 47,000 accounts”.

Cetera Firms were warned about the deficiencies by the Securities and Exchange Commission (SEC) examinations in July 2013, August 2015, and September 2017.  The fact that there was inadequate recordkeeping of client-level account information to determine suitability where Cetera Firms were aware of their FINRA membership obligations their DRR’s private securities transactions. In addition, the Cetera Firms charged and collected fees from their DRRs for such supervision.  Dually-registered representatives have standards of care provide by both FINRA and the SEC, through suitability and best-interest obligations.  Yet, the Cetera Firms failed to supervise certain private securities transactions of dually registered representatives who were associated with outside registered investments advisors (RIAs) and had unreasonable supervisory systems and WSPs to supervise private securities transactions that the dually registered representatives recommended through the outside RIAs.

KlaymanToskes is a leading securities law firm dedicated to the protection of investor rights.  Our Investment Litigation Blog entry is designed to alert investors of broker misconduct and the failure of brokerage firms to adequately supervise the handling of investor accounts.  The purpose of this Blog Post is to investigate whether investment recommendations made by Cetera Advisors Network, Cetera Advisors and Cetera Financial Specialists, referred to as the Cetera Firms, in Private Securities Transactions.  For investors  with investment losses that exceed $250,000 from accounts at full-service brokerage firms, and have information relating to the manner in which the firm handled their accounts are encouraged to contact Lawrence L. Klayman, Esq., at (561) 542-5131, and download our Special Investor Report.

About KlaymanToskes

KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm represents high net-worth, ultra-high-net-worth, and institutional investors, such as non-profit organizations, unions, public and multi-employer pension funds. KlaymanToskes has office locations in California, Florida, New York and Puerto Rico.