The $1m figure is a compendium of fines divided by the firms:
- Cetera Advisor Networks LLC, $750,000
- Cetera Advisors LLC, $ $150,000
- Cetera Financial Specialists LLC, $100,000
Why Cetera Was Sanctioned
The crux of this FINRA complaint involves the failure by these firms to properly establish and enforce a supervisory system for their DRR reps. Many of these reps deal in financial products of these firms as well as financial products from other firms not associated with Cetera.
Known as a “dually registered representative” (DRR), these are agents who are registered at more than one broker. Frequently the secondary registration is with an outside and unaffiliated agency, and there could be a potential conflict of interest.
At Cetera, these DRR agents managed over $80B in customer assets from more than 47,000 client accounts by the first part of 2018.
FINRA states that although the firms were aware of these supervisory deficiencies, the firms failed to create and implement policies and processes that would better oversee these transactions. The advisors, along with specialists and networks, also failed to create and preserve records for these transactions. These records are required under FINRA Rules 4511 and 2010 and NASD Rule 3110.
In the settlement, Cetera neither confirmed nor denied FINRA’s findings. The respondents have accepted the imposed censure. They are also required to review, revise and update their procedures to better supervise client transactions of their DRRs.
Previous FINRA Sanctions
This isn’t the first time Cetera has been fined. In 2018, FINRA fined Cetera $1.4 million for a broker who was excessively trading, or “churning”, in his customers’ accounts. Of the 14 clients involved, some were elderly.
The excess trading enriched the broker and the agency while losing $691,800 for the clients. Ironically, the broker also received sales awards for his actions. That broker was barred from the industry in 2017, and Cetera was ordered to pay restitution for the losses, then fined $700,000 for not adequately responding to “red flags.”
Additionally, the Securities and Exchange Commission (SEC) notified Cetera of these deficiencies during three previous examinations: July 2013, August 2015, and September 2017. Despite multiple efforts to address these issues, none of the firms made much effort to remedy them.
Have You Invested With Cetera?
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