Cambridge Investment Research

Sales of Non-Traded REITs Contributes to Increased Broker Dealer Revenues

May 21, 2014 | by Staff Attorney

Despite the broad market’s recent volatility, 2013 brought the twenty-five largest independent broker dealers double-digit revenue growth on average, according to an Investment News report. After a weak 2012, these independent broker dealers roared to a 13.2% year over year increase in revenue, recording $18.46 billion in 2013 according to this year’s Investment News survey.

The overall strength of the S&P 500, gaining 29.6% in 2013 was one contributing factor to the 2013 success of independent broker dealers. The other factor however, was a flood of commissions generated from record sales of alternative investment products, namely non-traded real estate investment trusts (REITs). As Eric Schwartz, chief executive of Cambridge Investment Research explained, “There were two reasons for last year’s results. The stock market was up 30%, and there was an unusually high percentage of dollars in alternatives and REITs being sold. Remember, a number of REITs had public listings, and clients reinvested back into other REITs.”

According to the Investment News survey, the top ten independent broker-dealers with the most growth from alternative investments include: (1) Independent Financial Group; (2) Triad Advisors; (3) Royal Alliance Associates; (4) National Planning Corp.; (5) First Allied Securities; (6) Lincoln Financial Network; (7) Cambridge Investment Research; (8) Commonwealth Financial Network; (9) Ameriprise Financial Services; 10) LPL Financial.

FINRA Alleges that Cambridge Investment Research Failed to Supervise Broker Emails

February 20, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned brokerage firm Cambridge Investment Research, Inc. concerning allegations that from January 2009, to July 2010, Cambridge failed to ensure that the firm preserved, maintained, and reviewed the business emails of two of its registered representatives. FINRA found that during this time Cambridge was relying upon its representatives to forward copies of their emails but did not have effective procedures reasonably designed to ensure that the representatives actually forwarded emails in violation of FINRA supervision rules.

Cambridge has been a FINRA member since December 1995 and has 3,044 registered individuals in 1,530 branch offices.

The duty to supervise has been held to be a critical component of the securities regulatory scheme. Supervisors have an obligation to employ systems and processes designed to ferret out wrongful behavior. In addition, firms must respond vigorously to indications of irregularity, commonly referred to as “red flags” of misconduct.

Broker William Hogue Suspended Over Science Fitness Promissory Note Sales

January 31, 2014 | by Staff Attorney

Broker William Larry Hogue, Jr. (Hogue) has been suspended and fined by the Financial Industry Regulatory Authority (FINRA) concerning allegations that Hogue participated in an outside business activity without providing written notice to Cambridge Investment Research (Cambridge) his employing brokerage firm in violation of FINRA rules. Additionally, FINRA alleged that Hogue participated in private securities transactions by selling promissory notes totaling over $1 million to at least nine investors.

Hogue entered the securities industry in March 2001. In March 2005, Hogue became associated with Cambridge and with Investors Asset Management of Georgia, Inc. (Investors) as a registered investment advisor. In February 2012, Hogue was permitted to resign from Cambridge for receiving debt financing for outside business activities through the sale of promissory notes without firm approval.

FINRA alleged that Hogue and two other partners formed SFL, presumably SFL stands for Science Fitness LLC, on August 20, 2010, for the purpose of operating a health club. FINRA found that Hogue served as co-chief executive manager of SFL and was directly involved in the management of the health club. FINRA alleged that Hogue did not initially disclose this outside business activity to Cambridge but that Cambridge discovered Hogue’s involvement with SFL through a routine review of Hogue’s emails. Subsequently, Hogue disclosed the SFL to Cambridge on August 10, 2011. As a result of Houge’s failure to timely disclose his involvement in SFL FINRA found that Hogue violated FINRA Rules 3270 and 2010.