In their study "How Widespread and Predictable is Stock Broker Misconduct?" researchers at SLCG discovered that past customer complaints against individual brokers can indicate the likelihood of future complaints. McCann, Qin, and Yan also found that incorporating co-workers' complaint histories notably enhances the predictive accuracy for brokers without prior complaints. Furthermore, they determined that customer complaints that were denied - beyond just settlements and awards - are valuable in forecasting potential investor harm.

In their study, Egan, Matvos, and Seru confirm that the regulatory and labor market mechanisms do not effectively filter out poor brokers from the industry. Instead, they steer these brokers over time towards brokerage firms that employ individuals with a disproportionately high incidence of customer complaints. These firms are characterized by lax hiring practices and relaxed compliance ethics, targeting less sophisticated investors.

Dimmock et al. [2016], in a related research endeavor, uncover that financial fraud spreads like a contagion. They ascertain that the likelihood of a broker engaging in financial fraud is significantly affected by the predisposition of their coworkers toward fraudulent behavior, even when accounting for firm culture, branch environment, market conditions, and state regulatory frameworks.

Mario Govics current employer, is one of the 30 highest risk brokerage firms measured by the percent of brokers at the firm who have customer complaints disclosed on their BrokerCheck reports. 22.56% of 's brokers have customer complaints compared to only 2.71% of all brokers who have complaints.

If you have questions about this post, about and/or Mario Govic or about the management of your accounts, please contact SLCG for an initial consultation or email us at BrokerInquiry@SLCG.com.

SLCG Economic Consulting, LLC

For nearly 25 years, SLCG Economic Consulting, LLC ("SLCG") has provided consulting services to individuals, corporations and state and federal agencies mostly related to finance and economics. SLCG professionals include professionals with substantial academic and government experiences who conduct ongoing publishable research.

SLCG is a wholly owned subsidiary of McCann Yan Holdings, Inc., a Virginia incorporated company based in Northern Virginia.