Most investors believe their financial advisors are competent and ethical. Otherwise, they would terminate the relationships. The same investors also believe they are protected by industry regulators. The article Many Years of Overlooked Red Flags Catch Up to Stockbroker will open your ideas to what is really going on.
The stockbroker, who is named in the article, worked at Merrill Lynch for 19 years. He had more than 60 client complaints on his record. He resigned in 2010 when the company started an investigation based on a client complaint. The company subsequently paid $12 million to settle complaints against him and the firm. Clearly, Merrill Lynch did not view it as their responsibility to do what was best for clients. There is a good chance the broker produced substantial revenue for Merrill Lynch so he stayed employed with active securities licenses.
FINRA (Financial Industry Regulatory Authority) finally barred him from the business after 69 complaints that occurred over a 13-year period. It took an incredible 13 years for this agency to react to an extraordinary number of complaints. Clearly, FINRA did not view it as their responsibility for 13 years. In case you don’t know this, Wall Street firms fund FINRA. You don’t bite the hand that feeds you.
The SEC, does not regulate stockbrokers (FINRA does), but it sued the broker for his alleged participation in a Ponzi scheme. His current broker/dealer, yes he still had active securities licenses, terminated him when the lawsuit was made known to them. Given his history at Merrill Lynch and FINRA, you should be asking why another broker/dealer would hire or license him.
Now the FBI enters the picture. Last month, yes last month, it charged him with selling unregistered securities. Investors lost $7 million while he is supposed to have made $5 million in commissions.
If you are an astute investor this is a wake-up call that you have to pay more attention to the competence and ethics of the financial advisors who influence or control your financial decisions. Do not assume the industry will protect you from unethical financial advisors. If you are an apathetic investor, go back to sleep.