Securities Lawyers Blog
Our law firm represents individual and institutional investors that have been mistreated by their brokers and brokerage firms, such as Cetera Financial Specialists LLC. Many investors do not recognize broker misconduct in their accounts, and those that do are often hesitant to seek help. Broker misconduct spans many issues that violate industry rules, including unauthorized trading, breach of fiduciary duty, unsuitable asset allocation, and churning. The attorneys at Gana Weinstein LLP can analyze your accounts and investments to determine if there was misconduct in the handling of your account.
Cetera Financial Specialists is an independent broker-dealer that operates as a distribution and support platform for financial professionals and their clients. Headquartered at 1450 American Lane in Schaumburg, Illinois, the firm is part of the Cetera network and has been registered with the SEC since 1982.
Cetera Financial Specialists LLC – By the Numbers:
- CRD #: 10358
- Regulatory Events: 11
- Arbitration Events: 3
- Broker Employees: 1,643
Cetera Financial Specialists LLC – In the News:
FINRA v. Cetera Financial Specialists LLC (Case #2015046716901) – 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). By early 2018, these DRRs managed more than $80 billion in customer assets across more than 47,000 accounts. The Cetera Firms were aware of the supervisory deficiencies—they were identified in Securities and Exchange Commission (SEC) examinations in July 2013, August 2015, and September 2017—yet, despite several efforts to address such deficiencies, failed to implement systems and procedures to reasonably supervise the transactions. Networks, Advisors, and Specialists’ failure to supervise the DRRs’ participation in private securities transactions violated NASD Rule 3040(c) and FINRA Rules 3280(c) and 2010. In addition, the firms’ failures to establish, maintain and enforce reasonable supervisory systems and written supervisory procedures violated NASD Rules 3010(a) and (b) and FINRA Rules 3110(a) and (b) and 2010. Networks, Advisors, and Specialists also failed to make and preserve related books and records in violation of NASD Rule 3110 and FINRA Rules 4511 and 2010.
FINRA v. Cetera Financial Specialists LLC (Case #2015045233601) – Between January 2012 and December 2014 (the “Relevant Period”), CFS failed to establish, maintain and enforce a supervisory system, including written supervisory procedures, reasonably designed to consider whether its registered representatives’ outside business activities would interfere with or compromise the registered persons’ responsibilities to the Firm or customers and evaluate the advisability of imposing specific conditions or limitations on its registered representatives’ outside business activities. By virtue of the foregoing, CFS violated NASD Rule 3010 (for the period before December 1, 2014) and FINRA Rule 3110 (for the period on and after December 1, 2014), as well as FINRA Rules 3270 and 2010.
FINRA v. Cetera Financial Specialists LLC (Case #2016050259101) – Between July 1, 2009, and July 1, 2017 (the “Relevant Period”), CFS disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge (“Eligible Customers”). These Eligible Customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. During this period, CFS failed to establish and maintain a supervisory system and procedures reasonably designed to ensure that Eligible Customers who purchased mutual fund shares received the benefit of applicable sales charge waivers. As a result, CFS violated NASD Conduct Rule 3010 (for misconduct before December 1, 2014), FINRA Rule 3110 (for misconduct on or after December 1, 2014), and FINRA Rule 2010.
FINRA v. Cetera Financial Specialists LLC (Case #2015045234401) – This case concerns the Cetera Firms’ failure to establish, maintain, and enforce a supervisory system reasonably designed to identify red flags in the sale of multi-share class variable annuities (“VAs”). Between January 2013 and December 2014 (the “Relevant Period”), the Cetera Firms earned a substantial portion of their revenues from the sale of VAs, and specifically the sale of L-share VAs (“L-share contracts”). L-share contracts typically provide a shorter surrender period, of three to four years, than B-share contracts, which typically have a surrender period of 7 years. Insurance companies design L-share contracts so that customers pay a higher fee for the benefit of a shorter surrender period. L-share contracts are designed for investors with short-term time horizons or who want the optionality of being able to surrender the L-share contract sooner than a B-share contract. Pursuant to the terms established by the insurance company manufacturers, if a purchaser chooses not to surrender an L-share contract during the surrender period, the purchaser continues to pay a higher annual fee for the life of the contract, unless the contract provides for a “persistency credit.” During the Relevant Period, current customers of CAN, FAS, SBS and VSR collectively purchased approximately 2,900 L-share contracts together with one of two long-term riders. The first of these riders, frequently known as the Guaranteed Minimum Income Benefit Rider (GMIB), provides for the added benefit of guaranteed income for life. The second, frequently known as the Guaranteed Minimum Withdrawal Benefit Rider (GMWB), provides for the added benefit of guaranteeing a minimum amount the customer will be able to withdraw from the contract over time (the riders are collectively referred to as the “Long-Term income Riders”). Long-Term Income Riders are often utilized by investors with long-term time horizons and cost purchasers additional annual fees in exchange for the added benefits. Moreover, because of the potentially incompatible time horizons, L-shares with Long-Term Income Riders may present a red flag that the purchase may not be suitable for a customer’s investment objectives and time horizon. In addition, many of the customers who purchased L-share contracts from the Cetera Firms stated that they had a long-term investment horizon, which should have been a red flag given the short-term nature of L-shares. CAN, FAS, SBS and VSR failed to identify and investigate these red flags, and as a result, violated FINRA Rules 2330(c), NASD Rule 3010 (for conduct before December 1, 2014), FINRA Rule 3110 (for conduct on and after December 1, 2014) and FINRA Rule 2010.
Gana Weinstein LLP has successfully handled hundreds of customer investment disputes with their brokerage firms. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free and we welcome all inquiries.