Securities Lawyers Blog
Elder financial abuse, unauthorized trading, churning, and broker theft are among the most serious forms of broker misconduct, and they can occur at brokerage firms of every size. The investor attorneys at Gana Weinstein LLP represent individuals and families who have suffered investment losses because of a dishonest or negligent financial advisor, including customers of firms such as Betterment Securities. We review account activity, identify misconduct, and bring FINRA arbitration claims to recover what was lost.
Betterment Securities is the broker-dealer affiliate of Betterment, providing brokerage, execution, and custody services for the company’s digital investing, retirement, cash management, and 401(k) offerings. Its parent Betterment was founded in 2008 by Jon Stein and Eli Broverman, is headquartered in New York City, and serves more than one million customers.
Betterment Securities – By the Numbers:
- CRD #: 47788
- Regulatory Events: 2
- Broker Employees: 32
Betterment Securities – In the News:
FINRA v. Betterment Securities (Case #2015048047101) – Betterment LLC is an online wealth management service, which was created in 2010 and uses software algorithms and technology to manage its customers’ investment portfolios. Betterment Securities provides brokerage services to the customers of Betterment LLC and is a carrying firm. As a carrying firm, Betterment Securities has a primary responsibility to protect its customers’ assets. Betterment Securities’ brokerage business grew quickly as Betterment LLC grew. The Firm had approximately $120,000 in annual revenues in 2011 and more than $1.2 million in annual revenues in 2014. Betterment Securities holds its customers’ securities in omnibus accounts at its clearing firm. In June 2014 the value of securities in the omnibus account was approximately $608 million. During this period of significant growth in its business, the Firm did not ensure that its practices complied with certain FINRA and SEC financial and operational rules and interpretations. First, during the period from October 2013 through January 2015, the Firm structured its transactions on days when it was required to calculate its reserve deposit differently than on other days in order to reduce its Customer Reserve Account obligations. Specifically, the Firm generally moved customer deposits to its omnibus account to fund its pre-settlement withdrawal program. However, on days when the Firm was required to compute its customer reserve requirement, the Firm did not move customer deposits and instead used loans from its clearing firm to fund that program. Thus, the Firm engaged in “window dressing” by altering its practices on reserve computation days specifically to reduce its reserve formula computation and thereby reduce its reserve requirement. Second, during the period from October 2013 through August 2014, the Firm did not properly segregate customers’ wholly owned securities in a good control location. These practices, along with other errors in the Firm’s computation of its reserve requirement, constitute violations of the reserve formula and possession and control requirements of Section 15 of the Securities Exchange Act of 1934 (“SEA”) and Rule 15c3-3 promulgated thereunder and FINRA Rule 2010 during the period from October 2013 through January 2015. In addition, from June 2012 through December 2014 the Firm did not make and keep certain of its books and records in the manner required by SEC and FINRA rules. For example, the Firm did not create and maintain certain records of cash movements in the form required by SEC and FINRA rules. In addition, the Firm’s systems maintained its stock record on a trade date basis, rather than settlement date basis. By this conduct, the Firm violated Section 17 of the SEA and Rules 17a-3 and 17a-4 promulgated thereunder and FINRA Rules 4511 and 2010 during the period from June 2012 through December 2014.
FINRA arbitration is faster and less formal than court, and most claims against brokerage firms such as Betterment Securities are resolved there. The securities arbitration attorneys at Gana Weinstein LLP can explain how to file a FINRA claim and what to expect. Our consultations are free and we welcome all inquiries.