FINRA Finds Compliance To Be Lax Around Illiquid Securities

A new report from FINRA finds that some brokers and brokerage firms are not doing due diligence for their customers when it comes to illiquid securities such as variable annuities, REITs, and private placements.

This new report finds that some firms rely heavily on these types of securities, over-concentrating clients in non-traded investments, including sector-specific investments and complex structured notes.

Brokers may recommend these types of investments to customers who are unfamiliar with them, and don’t have the investment experience that other customers may have. Some brokers may simply recommend them without regard to the customer’s needs, investment experience, financial experience and other relevant factors. Since many of these investments offer a higher commission, many brokers are more likely to suggest them without considering the cost to the customer, losses, or any tax consequences.

Some firms also placed a high value on third-party information paid for by the issuer, without considering any conflicts of interest. These firms fail to investigate any “red flags” that are discovered, which also means failing to meet compliance rules.

FINRA also found that many firms had no safeguards to prevent excessive trading in customer accounts. Some brokers also took advantage of their authority regarding discretionary trading. These brokers either executed transactions without client approval, or altered tickets to make it look like they had permission to conduct a transaction.

Our attorneys have successfully prosecuted securities arbitration claims against many stockbrokers for claims relating to illiquid or esoteric products, frequently these claims involve products with high commissions, costs, and fees and are recommended in large positions.

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 no-fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today and let us know how we can help.