Founded in 1983, Cetera Advisor Networks, LLC (CRD# 13572) is one of the largest independently managed brokerage firm in the U.S. Based in El Segundo, California, the company has a network of 10 broker-dealer firms consisting of nearly 10,000 advisors.
Cetera was originally created under the name of Financial Network Investment Corporation (FNIC). FNIC was sold to Aetna Financial Services in 1997; three years later, Aetna was acquired by ING Group. The firm – along with two other ING Group firms – was bought by Lightyear Capital, where it was renamed Cetera Financial Group.
In 2014, Lightyear sold Cetera for $1.15 billion to RCS Capital Corporation, which was partially owned by Nicholas Schorsch. Schorsch and his companies became infamous for the many BDCs and REITs they sponsored.
Brokerage firms controlled by Cetera Advisor Networks, LLC:
Girard Securities, Inc. (CRD# 18697)
VSR Financial Services, Inc. (CRD# 14503)
Investors Capital Corp. (CRD# 30613)
Summit Brokerage Services, Inc. (CRD# 34643)
Summit Financial Group Inc. (CRD# 109485)
First Allied Advisory Services, Inc. (CRD# 137888)
First Allied Securities, Inc. (CRD# 32444)
Legend Equities Corporation (CRD# 30999)
Legend Advisory Corporation (CRD# 104761)
Tower Square Investment Management LLC (CRD# 165436)
Cetera Investment Advisers LLC (CRD# 105644)
Cetera Financial Specialists LLC (CRD# 10358)
Cetera Investment Services LLC (CRD# 15340)
Cetera Advisors LLC (CRD# 10299)
J.P Turner & Company, L.L.C. (CRD# 43177) (Now closed)
Regulatory violations committed by Cetera
5 Cetera Subsidiaries Ordered to Pay $4.5 Million for Supervisory Failures Connected to Variable Annuity L-Shares
In October of 2016, the Financial Industry Regulatory Authority (FINRA) sanctioned and fined these five Cetera firms:
- Cetera Advisor Networks LLC
- Cetera Financial Specialists LLC
- First Allied Securities, Inc.
- Summit Brokerage Services, Inc.
- VSR Financial Services, Inc.
The firms entered into an Acceptance, Waiver and Consent (AWC) agreement with FINRA that alleged that the firms ignored red flags with their customers, including long-term investment horizons. They also recommended that their customers buy L-shares. FINRA also discovered that the firms did not have sufficient systems in place to review for variable annuity classes or to spot patterns of unsuitable sales. The Cetera firms were ordered to pay their customers a total $4.5 million.
Cetera Penalized for Excessive Sales Charges on Unit Investment Trusts
In October of 2015, Cetera was ordered to pay over $300,000 in fines and restitutions related to excessive sales charges for their customers. Cetera didn’t admit or deny the findings, but the company agreed to the sanctions and to the findings. It was discovered that Cetera did not identify and apply sales charge discounts to customers’ eligible purchases of unit investment trust (UITs), which resulted in an overcharge of $151,000. Cetera also failed to create a supervisory system to prevent this from happening.
Cetera Fined over $3.4 Million for Revenue Sharing Program Linked to Mutual Funds
In July of 2006, Cetera was fined $3.41 million due to allegations of maintaining a shelf space program (also known as a revenue sharing program) called the Strategic Partners Platform. FINRA says that Cetera gave preferential treatment to mutual fund complexes that participated in their program in exchange for payments. According to FINRA, certain mutual fund complexes directed about $12.5 million in portfolio brokerage commissions to the firm through clearing brokers.