What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: June 24, 2021

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with financial advisors and insurance agents who sell unsuitable insurance products. All too often, securities brokers who lose their licenses to sell stocks, bonds, and mutual funds find an escape hatch to remain in the financial services industry: They move on to sell insurance products. These “rogue” brokers, however, haven’t necessarily changed their ways. They may continue their abusive sales practices by selling insurance products instead.

A recent academic paper profiling “wandering” financial advisers who jump from securities to insurance found that “a little over one-third of advisors who exit the brokerage industry remain in at least one other regime, that advisors are significantly more likely to change regimes after committing serious misconduct, and that wandering advisors with a history of misconduct are significantly more likely to engage in future misconduct.”

In this study, “regime” means transitioning from selling securities to insurance products, noting “wandering advisors with a history of serious misconduct disproportionately end up in the highly-fragmented state insurance regimes.”

Why are rogue securities brokers able to move from one industry to another, even after wronging investors? Securities brokers and insurance agents are regulated by different agencies. FINRA, state securities regulators, and the U.S. Securities and Exchange Commission (SEC) regulate broker-advisers while state insurance agencies register and monitor insurance agents. These agencies don’t necessarily talk to each other.

More importantly, rogue broker-advisers know they won’t get scrutinized as closely under state insurance regulation as opposed to federal FINRA and SEC oversight. It’s also often harder to identity bad actors through less-vigilant state insurance commissions. “Financial-advisor misconduct has significant consequences for investors,” the study adds, “so a wide range of federal, state, and self-regulatory institutions have authority to detect and deter such misconduct. But each regime takes meaningfully different approaches to these tasks, creating incentives for advisors, particularly those with a history of harming investors, to seek a more lax regulatory environment.”

“It’s a very significant threat to ordinary American families who are trying to save for their retirement,” stated co-author Robert Jackson, Jr. a professor of law at New York University. “FINRA disclosure gives investors a fighting chance to go online and to look to see in whom they’re trusting their money. But `wandering’ allows that broker to escape that accountability by hiding in a state-level regime that allows them to continue hurting investors with no disclosure about what is happening.”

FINRA, the brokerage industry self-regulator, offers a BrokerCheck database that discloses broker misdeeds. “But brokers can escape that kind of oversight when they drop their FINRA registration and operate under a different regulator, such as state insurance commissioners,” Jackson said.

Have you invested with agents or broker-advisers who have sold you questionable insurance products or put your retirement funds at risk? FINRA and the SEC have strict rules on disclosing risk profiles on all investments sold by brokers and investment advisers. If they fail to fully inform you of downside risk, you may have a case in arbitration.

Firms are also legally required by FINRA to monitor and supervise what their brokers are selling – their investments must be vetted and authorized by the firms – and have an obligation to investors to fully reveal true risk and return information about the vehicles sold. Investors can file FINRA arbitration complaints if these rules are broken.

If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!


The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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If you have suffered financial losses because of the negligence or fraud of your financial advisor or broker through unsuitable investment recommendations, over-concentration, churning, misrepresenting risks, conversion or selling away, you have legal rights and options to pursue recovery of those losses.

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