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Bad Brokers

A Customer at Risk By Broker’s Cover-Ups

November 25, 2019

by Howard Haykin



A brokerage customer signed a variable annuity (“V/A”) application in October, but in January she noticed that the V/A contract had not yet been issued. Rather than admit to his mistakes and to the fact that he never submitted the customer’s application, the broker engaged in a series of cover-ups before finally submitting the V/A application in February.



INQUIRIES AND COVER-UPS.    In early January ... when the customer asked the broker why designated funds had not been transferred out of her account to pay for the new V/A contract, the broker said the application was too old and had to be updated. But rather than have the customer re-date or re-sign the form, the broker re-dated the V/A application himself.  In late January ... when the customer once again asked why funds were still sitting in her brokerage account, the broker told her that the V/A account had been established and, as proof, provided the customer with a fake account statement showing December 26 as the V/A issue date.  On February 14, ... the broker finally submitted the altered V/A application.


When Cambridge Investment Research, the broker’s employer, discovered the broker's conduct, the broker was asked to resign. Some 17 months later, the broker was hit with a $5,000 fine and a 4-month suspension.



CUSTOMER TAKE-AWAYS.    Customers should be wary when a broker take too long to fulfill a commitment. We see in this case that the customer expressed her wariness and concerns on multiple occasions - indicating that she was alert, seemingly on top of the situation, and her persistence paid off in getting the broker to eventually submit the application. However, the customer may not have take two additional steps that I believe would have solidified her rights with this broker and brokerage firm:


  • Contacted firm management to get explanations for the broker’s repeated delays and inconsistent responses.
  • Ascertain that the value of her investments were not hurt or disadvantaged by the delays in processing her application.



[For further details, click on FINRA Case #2018058496901.]