Securities Arbitration Lawyers BlogBrokers With Bad FINRA Disciplinary Records
When a registered FINRA broker dealer employs financial representatives, they have an obligation to supervise their brokers and employees so that they are compliant with both the firm’s rules and with FINRA’s.
Broker dealers are required to maintain adequate oversight to ensure that the people who work for them are working for the best interests of the customers. Without that oversight, financial services representatives may conduct business in a way that is not conducive to good business practices nor to the client’s best interest. This is particularly true when a broker dealer has representatives with a history of misconduct and disciplinary activity with FINRA and the SEC.
After discovering that one company did not have a solid system in place, FINRA chose to sanction the broker dealer itself. Recently, FINRA censured and fined SagePoint
Advisors (also called SagePoint Financial) more than $700,000, alleging that it failed to supervise brokers with a disciplinary history who were working directly with customers.
Even though the company had two separate departments responsible for compliance, it did not have a cohesive system nor written procedures addressing broker supervision. SagePoint also failed to assign additional personnel to the departments to handle the increased supervision and discipline on brokers with a history of misconduct. The departments did not collaborate and had no policy in place for the needed relationship, making it difficult to keep track of the brokers and their histories.
Additionally, SagePoint had two separate databases for broker disciplinary history, but incomplete and disjointed recordkeeping for them. This prevented staff from accessing complete information on the brokers disciplinary activity to increase supervision. Because there were so many lapses, the individuals responsible for supervision of these brokers missed multiple red flags on brokers who were a higher disciplinary risk.
SagePoint did not have a system that was sufficient to track, report, and address multiple instances of broker misconduct. The firm issued over 1,500 disciplinary letters to over 700 brokers since 2013. Of those, 132 brokers received three or more letters. Eleven of those brokers were disciplined at least 110 times, but the company failed to increase supervision or issue fines and sanctions that were appropriate for the individual brokers’ history of misconduct.
Gary Bowman
In an example of what can happen when a financial representative is unsupervised, one of SagePoint’s own brokers was sanctioned for unsuitable trading earlier this year.
From February 2013 through December 2017, Gary Max Bowman (CRD: #2035699), a broker registered to SagePoint at the time, engaged in unsuitable trading on behalf of customers. He was found to have recommended to his customers early rollovers of Unit Investment Trusts or, UITs. These securities are held for a specified period, usually 15 to 24 months, when the securities are sold. The proceeds are then paid to the investors. Between the inception of the trust and the maturity date, the portfolio has no active trading.
However, Bowman was found to recommend that his customers roll over UIT’s more than 100 days prior to their maturity on 4,200 occasions. Most of his customers’ UITs had a 24-month maturity. But Bowman continued to recommend that the customers hold them for just under one year and take the proceeds to purchase a new UIT.
Most UITs are also charged annual operating expenses paid to the sponsor out of the assets of the UIT. By trading them sooner, these customers incurred an increased cost for their investment, including unnecessary sales charges. Bowman’s customers did receive reimbursement of the excess sales charges from the firm in connection with FINRA’s separate settlement with SagePoint.
Bowman signed an Acceptance Waiver and Consent Letter (AWC), neither admitting nor denying the allegations. As a result, he was suspended for three months in all capacities and fined $10,000 in penalties. Ironically, this is the only disclosure and disciplinary history in Bowman’s 31-year career in the industry.
Did You Invest With SagePoint Financial Or Gary Bowman?
Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today at (800) 975-4345 and let us know how we can help.