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Bad Brokers' Incorrect Records Got Partially Corrected Last Week

We wrote that FINRA's BrokerCheck allowed brokers to report cases adversely resolved as "pending" last week, in Bad Brokers Falsify Their BrokerCheck Records and No One Notices.

We provided two examples. The first included a large award in FINRA's awards database that had not been correctly reported as adversely resolved on the broker's BrokerCheck but had been correctly reported on her employer's BrokerCheck. Our second example, was of two adversely resolved filings against another broker....

Bad Brokers Falsify Their BrokerCheck Records and No One Notices

BrokerCheck records are supposed to accurately reflect brokers' registration, complaint and disciplinary history but, inexplicably, sometimes BrokerCheck records are materially false. Like other problems we've identified with BrokerCheck, there is an easy, low-cost fix.

We have recently written about the problems with FINRA's BrokerCheck and suggested a simple free market solution that would allow investors to protect themselves with no further regulation. How Widespread and Predictable is...

This is Why Merrill Lynch Paid the SEC and FINRA $15 million over Bank of America's VOL Index-linked Structured Products.

The Securities and Exchange Commission yesterday announced a settlement with Merrill Lynch over structured products linked to Bank of America's proprietary investable volatility index based on VIX Future contracts ("VOL Index"). The SEC press release announcing the settlement and its Order Instituting Proceedings are available on the SEC website. The companion FINRA settlement press releaseand AWC are available on the FINRA website. Bank of America published its VOL Index in 2010 and shortly...

AdvisorHub, June 20, 2016 - "Spy Novelist Who Claimed Deception by Morgan Stanley Wins $3.6 Million"

Mason Braswell's "Spy Novelist Who Claimed Deception by Morgan Stanley Wins $3.6 Million" reports on the financial harm an investor incurred when his broker overstated the value of his investments over a three-year period. Dr. O'Neal testified on liability and damages for the Claimant.

A Bad Broker Found His Firm; You Should Avoid Them Both

In June 2016, a FINRA panel in Albuquerque, NM ordered Centaurus Financial, Inc. to pay the Claimant, a recent widow when the subject conduct began, $150,000 plus all hearing fees after reasoned findings that "the investments Hashemian recommended while at Centaurus were not suitable", that Centaurus was responsible for Hashemian's actions which "constituted fraudulent and negligently made misrepresentation and omitted material information in the sale of investments" and that "Centaurus...

Smaller Brokerage Firms Are Even Worse!

Last week we posted Have 1.3% or 7.3% of Stock Brokers Engaged in Misconduct? explaining that the competing estimates of broker misconduct differ because of differences in their definition of misconduct and the sample of brokers studied.

Firms with 400 to 999 Brokers Are Much Worse Than Larger Firms.

In last week's post, we listed the 100 highest risk brokerage firms with 400 or more registered brokers sorted by the percentage of their brokers associated with Investor Harm Events as of...

Investors Lose Over $7 Billion in SandRidge Energy Stock and Notes

In recent months, investors have lost billions of dollars as a result of their investments in SandRidge Energy, Inc. stock, notes and bonds. Sandridge is involved in the exploration and production of oil and natural gas in the continental United States with some interests in the Gulf of Mexico.

SandRidge's stock price has lost 99% of its value since 2014, erasing more than $4 billion of market capitalization. In addition to near complete losses to SandRidge stockholders, investors have lost...

Have 1.3% or 7.3% of Stock Brokers Engaged in Misconduct?

In our recent working paper How Widespread and Predictable is Stock Broker Misconduct? we reconcile estimates of misconduct, demonstrate that broker misconduct is predictable and explain that ostensibly publicly available BrokerCheck data could be used to help investors avoid bad brokers and bad brokerage firms if only it were made truly public instead of only speciously so.

Jason Zweig's recent column in the Wall Street Journal Is Your Broker Good or Bad? discussed our research problem. In...

How Widespread and Predictable is Stock Broker Misconduct?

In this paper we reconcile widely diverging recent estimates of broker misconduct. Qureshi and Sokobin report that 1.3% of current and past brokers are associated with awards or settlements in excess of a threshold amount. Egan, Matvos, and Seru find that 7.8% of current and former brokers have financial misconduct disclosures including customer complaints, awards, and settlements.

You can download our research paper, "How Widespread and Predictable is Stock Broker Misconduct?".


Enforcement Actions: Week in Review - April 8th, 2016


SEC Charges Four in Fraudulent "Free Dinner" Scheme
April 4, 2016 (Litigation Release No. 63)
Joseph Andrew Paul, John D. Ellis, Jr., James S. Quay and Donald H. Ellison were charged for embezzling money from victims by soliciting a "free dinner" scheme, splitting the victims' money amongst themselves instead of on investments they proclaimed had high returns. Quay has previous convictions of fraud, and both Quay and Ellison have questionable registrations as...

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