Securities Lawyers Blog
The law offices of Gana Weinstein LLP represents investors in investment disputes with their financial advisors or brokerage firms, such as Cetera Wealth Services, LLC. Many investors do not recognize financial advisor misconduct when it happens, but there are steps that can be taken to recover investment losses. There are many different types of broker misconduct, including breach of fiduciary duty, failure to supervise, misrepresentation, and churning. The attorneys at Gana Weinstein LLP can analyze your investments to determine if there was actionable misconduct by the broker or brokerage firm.
Cetera Wealth Services, formerly known as Cetera Advisor Networks, is a full-service retail securities brokerage firm whose financial professionals offer commission-based brokerage services and fee-based advisory services to investors, including through bank investment programs. Part of the Cetera network of independent retail firms under common ownership, the firm is registered in all 50 states and lists its principal office in San Diego, California.
Cetera Wealth Services, LLC – By the Numbers:
- CRD #: 13572
- Regulatory Events: 20
- Arbitration Events: 15
- Broker Employees: 8,266
Cetera Wealth Services, LLC – In the News:
FINRA v. Cetera Wealth Services, LLC (Case #2018057331002) – From at least March 2019 through August 2021, the Cetera Firms’ supervisory systems, including their written supervisory procedures (WSPs), were not reasonably designed to achieve compliance with Section 5 of the Securities Act of 1933, in violation of FINRA Rules 3110 and 2010. Over the same period, the Cetera Firms’ anti-money laundering (AML) compliance program was not reasonably designed to detect and cause the reporting of suspicious transactions, in violation of FINRA Rules 3310(a), 3310(f)(ii), and 2010. Additionally, from at least January 2017 through August 2021, Cetera Advisors failed to reasonably supervise the creation and dissemination of consolidated reports and failed to preserve such reports, in violation of Section 17(a) of the Securities Exchange Act of 1934, Exchange Act Rule 17a–4(b)(4), and FINRA Rules 3110, 4511 and 2010. For these violations, the Cetera Firms are censured, fined $1.1 million, and have agreed to an undertaking.
FINRA v. Cetera Wealth Services, LLC (Case #2020066875501) – Between October 2019 and July 2020, Cetera caused 26 registered representatives, whom the firm was recruiting, to take nonpublic personal customer information from the firms where the representatives were then registered and to disclose it to a third-party vendor without the other broker-dealers’ or the customers’ knowledge or consent, causing those broker-dealers to violate the SEC’s Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Information (Regulation S-P). As a result, Cetera violated FINRA Rule 2010.
FINRA v. Cetera Wealth Services, 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 Wealth Services, LLC (Case #2014040951702) – Between January 2009 and January 2015 (the “Relevant Period”), CAN failed to respond reasonably to red flags of unsuitable mutual fund switching, and unsuitable stock trading intended to conceal the switching, by one of its registered representatives, MK. MK’s misconduct spanned six years; occurred in the accounts of 14 customers, including seniors; involved hundreds of unsuitable mutual fund switches and related stock trades; and caused nearly $700,000 in customer losses. Although CAN’s supervisory system detected red flags indicative of MK’s misconduct as early as 2012, the Firm failed to reasonably respond to three audit reports and hundreds of electronic trading system alerts that flagged the short-term trading patterns as problematic. In particular, even though MK’s two Series 24 designated supervisors (the “Designated Supervisors”) detected and passed on their findings of potentially unsuitable trading via annual audit reports to the Firm’s home office, the Firm failed to take disciplinary action against MK. No one in the home office reviewed or acted upon those findings. In this instance, the Firm did not read, and thus failed to respond reasonably, to the audit reports it received detailing the potential misconduct. During the same period that the audits and trading alerts were flagging MK’s trading activity as problematic, the Firm was giving sales awards to MK for his high production. MK’s Designated Supervisors were registered with FINRA through the Firm, but were employed by an outside company that provided back office and compliance support to the Firm’s registered representatives (the “Outside Company”). The Firm allowed the Designated Supervisors to be managed by a sales manager (the “Sales Manager”), who was also an employee of the Outside Company and was registered with FINRA only as an Investment Company and Variable Contracts Products Representative, and not as a General Securities Principal. Although the Designated Supervisors also reported directly to the Cetera Home Office Supervision Department, the Firm did not establish a reasonable system to ensure that the Sales Manager, who lacked a supervisory principal license and had an indirect interest in MK’s financial production, did not interfere with the Designated Supervisors’ supervisory responsibilities. FINRA found that, in one instance, the Sales Manager directed that a Designated Supervisor not send MK a letter of reprimand for problematic trading that the Designated Supervisor had discovered. Only after FINRA began its investigation did the Firm take action against MK, terminating his registration by a Uniform Termination Notice for Securities Industry Registration (“Form U5”) filed in February 2015.
FINRA v. Cetera Wealth Services, LLC (Case #2016050258801) – Between July 1,2009, and January 1,2017 (the “Relevant Period”), CAN 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, CAN 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, CAN 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.
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