A disciplinary action taken by the Financial Industry Regulatory Authority against former Dublin, Ohio broker and investment advisor Sam Aziz...Read More
Failure to Supervise
Brokerage firms, wealth management firms, and investment advisory firms have a duty to supervise their financial advisors in order to prevent customers from harm. When a firm fails to adequately supervise an employee and a customer is damaged as a result, the firm can be held liable for the losses.
The Financial Industry Regulatory Authority (FINRA) regulates all securities brokerage firms in the United States, and has its own set of rules that the firms must abide by. FINRA Rule 3110(a) mandates that firms have supervisory systems for the activities of their financial advisors that are “reasonably designed” to “achieve compliance” with FINRA rules and securities regulations. It also outlines the minimum requirements for a firm’s supervisory system.
FINRA Rule 3110(b)(4), entitled “Review of Correspondence and Internal Communications,” requires a firm to have supervisory procedures in place to review incoming and outgoing correspondence and internal communications. In other words, firms must monitor their advisors’ incoming and outgoing emails.
The FINRA supervision rules require brokerage firms to create thorough supervisory systems and document their supervision efforts. Under the negligent supervision legal theory, the focus of the analysis is typically whether or not the firm has reasonable supervision controls in place and, more importantly, whether the firm actually implements the policies and procedures.
Please contact us for a free and confidential case evaluation if you believe that you are a victim of a firm failing to supervise its financial advisor.