According to FINRA Conduct Rule 3110, brokerage firms have an absolute duty to properly and adequately supervise their financial advisors. Such brokerage firms are required to have established adequate supervisory systems and procedures so that they properly supervise all activities of their financial advisors.
Negligent supervisions claims may be based on a wide variety of broker activities misdeeds. Generally, brokerage firm branch office managers are responsible for supervising brokers to ensure that they comply with industry rules and standards. These managers must oversee the hiring and training of brokers. Brokerage firms must also review all communications, including e-mails, text messages, Whatsapp messages, SMS, etc. between financial advisors and their customers.
In addition, brokerage firms must adequately supervise the opening of brokerage accounts, account activity and performance, suitability determinations for each customer, and more. Supervisory systems must be implemented and enforced to alert managers to suspicious behavior such as brokers making unsuitable investment recommendations, churning, unauthorized trading, or other misconduct. Brokerage firms must also monitor and follow up on investor complaints.
Brokerage firms are responsible for ensuring that their employees are honest, ethical, and place their customers best interests ahead of their own. When brokerage firms fail to properly supervise their brokers and customers suffer damages, the brokerage firm may be liable to investors for such losses caused by its failure to adequately supervise its brokers.
If you feel your financial losses were caused by broker misconduct, Levin Law can review your situation to determine the cause of the loss.
Securities broker-dealers, also known as stock brokerage firms and investment advisors, are legally obligated to supervise their stockbrokers and financial advisors. The duty to supervise is imposed on such brokerage firms by the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), as well as state and federal laws. If an investor suffers financial losses due to the negligence or intentional misconduct of his or her broker, that investor may often sue the brokerage firm for the damages caused by the brokerage firm’s failure to properly supervise its financial advisors.