Cetera Advisors, Cetera Advisor Networks, and Cetera Financial Specialists (“Cetera”) allegedly failed to establish, maintain, and enforce a supervisory system and written supervisory procedures that were designed to supervise private securities transactions of their dually registered representatives (“DRR”) according to FINRA’s Letter of Acceptance, Waiver and Consent (AWC), under review by investor rights attorney Alan Rosca.
Investor rights attorney Alan Rosca of the Rosca Scarlato LLC law firm is investigating Cetera’ alleged failure to supervise certain private securities transactions conducted by their DRRs at unaffiliated or outside registered investment advisors. Investors who are concerned about their investments with Cetera are encouraged to contact attorney Alan Rosca for a free case evaluation and discussion of their options, or to provide any useful information. Call 888-998-0530, via email at arosca@rscounsel.law, or through the contact form on this webpage.
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The AWC signed by the three Cetera firms in December 2020, states that by early 2018, the Cetera’ dually-registered representatives managed more than $80 billion in customer assets across more than 47,000 accounts, the AWC notes.
During the Securities and Exchange Commission (SEC) examinations in July 2013, August 2015, and September 2017, the Cetera firms were allegedly aware of the supervisory deficiencies but still failed to implement systems and procedures to reasonably supervise the private securities transactions, the AWC states.
The Cetera firms also allegedly failed to make and preserve related books and records, thus, violating FINRA Rules, according to the regulators’ letter.
Cetera Advisors allegedly did not begin receiving transaction data for its DRRs outside securities transactions until June 2018. Because of this, they allegedly did not have the information necessary to reasonably supervise its outside RIA transactions nor did they receive the customer-specific account information to satisfy its supervisory obligations.
During this time, 41 Cetera Advisors DRRs who operated through 17 RIAs had assets under management of about $1.2 billion across 4,400 accounts, as stated on the AWC.
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Cetera Advisor Networks allegedly did not receive automated data feeds from all custodians until June 2018 and therefore did not have access to information about certain outside RIA accounts that were not held at the firm. In January 2018, Networks had 487 DRRs who operated through 12 outside RIAs with assets under management of about $77,8 billion across about 42,000 accounts, the AWC notes.
Cetera Financial Specialists allegedly adopted procedures in April 2014 that required its representatives to provide on a monthly basis, a spreadsheet for all transactions conducted through the RIA, according to the AWC.
Cetera Financial Specialists reviews were often delayed for months, therefore they were not reasonable. There were allegedly month-long gaps where transactions were not reviewed. Even when the spreadsheets were manually reviewed, the review was not reasonable because the spreadsheets did not capture the customer-specific information, such as net worth or income, which is important to review the transaction for suitability, according to the AWC.
As of March 2017, Cetera Financial Specialists allegedly had seven DRRs who operated through three outside RIAs with assets under management of about $382 million across 680 accounts.
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As a result of Cetera firms alleged misconduct, they received a censure, and a total fine of $1 million; $750,000 for Cetera Advisor Networks, $150,000 for Cetera Advisors, and $100,000 for Cetera Financial Specialists, the AWC notes.
Cetera firms signed the AWC accepting and consenting to FINRA’s findings, without admitting or denying the findings, and solely for the purposes of the proceeding brought by or on behalf of FINRA , prior to a hearing and without an adjudication of any issue of law or fact.
What Investors Should Know About Dually Registered Representatives
Dually registered representatives of FINRA member firms are required to report any kind of business activity engaged in, away from the member firm. Representatives are required to give a written notice in order to be employed or accept compensation from any business activity other than a passive investment, outside the scope of the member firm.
DRRs are also required to provide written notice of proposed outside securities transactions or activities before engaging in these activities.
FINRA has stated that member firms must develop and maintain a recordkeeping system that captures the transaction performed away from the firm by registered representatives in its books, and records.
Finally, it is important to note that, as of the date of this article, there has not been a finding of liability as to the complaints or allegations mentioned in this article, unless otherwise indicated. Any reader should also read the original sources hyperlinked in this blog for accuracy, including any BrokerCheck report and/or record of any disciplinary or regulatory action. Those sources are incorporated by reference into the text of this blog, and are the governing materials in case of any inconsistencies or typos in this blog.
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Concerned Cetera Investor? Securities Lawyers Investigating
The Rosca Scarlato LLC law firm represents investors who lose money as a result of investment-related fraud or broker misconduct and is currently investigating Cetera’s alleged failure to supervise its dually registered representatives.
The firm takes most cases of this type on a contingency fee basis and advances the case costs, and only gets paid for their fees and costs out of money recovered for clients. Attorney Alan Rosca, a securities lawyer and adjunct professor of securities regulation, has represented thousands of victimized investors across the country and around the world in cases ranging from arbitrations to class actions.
Investors who are concerned about their investment with Cetera Advisors, Cetera Advisor Networks, and/or Cetera Financial Specialists are encouraged to contact attorney Alan Rosca for a free no-obligation evaluation of their recovery options, at 888-998-0530, via email at arosca@rscounsel.law, or through the contact form on this webpage.
