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Bad Brokers

Customer at Risk By Her Broker’s Cover-Ups

November 25, 2019

by Howard Haykin



Ever give your broker instructions, but they never were carried out - until you called and called and called? One brokerage customer with Cambridge Investment Research instructed her broker to buy a variable annuity (“V/A”) contract. That was in October, but by January nothing had been done. So she called and called and called until eventually her V/A application was submitted in February. 



PHONE CALLS AND COVER-UPS.    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.

  • In early January ... when the customer asked why funds had not been transferred out of her account to pay for the new V/A contract, the broker said her application was too old and had to be updated. But rather than have the customer re-date or re-sign the form, the broker violated the rules by re-dating 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 lied by saying 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 - more rule violations.  
  • 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.



THE SQUEAKY WHEEL GETS THE GREASE.    While there's some comfort knowing the broker was punished for his errant conduct, it's most reassuring that this customer's wariness and persistence paid off in getting what she wanted. That said, she may have gotten her issues addressed sooner and more completely had she taken these 2 other steps: (i) Contacted firm management to act on her concerns; and, (ii) Ascertained that the value of her investments were not hurt or disadvantaged by the broker's delays in processing her application.



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