What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: May 2, 2017

The New York Times today has a wonderful article on brokerage firms failing to update stockbrokers regulatory records. The article’s title is “Wall Street Often Slow To Disclose Brokers’ Sins.” Unfortunately, for decades Wall Street brokerage firms have failed miserably in keeping the public aware of a broker’s customer complaints or even criminal actions. The mentality at many firms is to cover up bad actions and keep quite on as much h as possible. It is often the unsuspecting public who gets taken by a bad broker

Under NASD Notice to Members 88–67, brokerage firms must completely and accurately disclose information on Form U-5s. According to the NASD:

The NASD Board of Governors…has determined that it is appropriate to re-emphasize the NASD’s policy with respect to complete and accurate disclosure on Forms U-4 and U-5 and with respect to a member’s obligation to adequately research the background of its potential employees.
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Member firms are also required to file complete and accurate information on any Uniform Termination Notice for Securities Industry Registration (“Form U-5”) that is required to be filed with the NASD. Article IV, Section 3 of the By-Laws requires that a member firm file Form U-5 promptly, but not later than 30 calendar days after terminating a registered person. Items 13–15 on Form U-5 ask for information concerning apparent misconduct by a person while associated with the firm submitting the Form U-5. A “yes” answer to Items 13–15 must be accompanied by a detailed explanation of the apparent misconduct. Failure to provide accurate answers to Items 13–15 may deprive the NASD of its ability to detect violations and subsequently sanction persons for violations of the NASD’s rules and other applicable federal statutes and regulations. Failure to provide this information may also subject members of the investing public to repeated misconduct and may deprive member firms of the ability to make informed hiring decisions. 

The NASD would also point out that members and their associated persons may be subject to administrative, civil, and even criminal penalties for failing to provide complete and accurate information on Forms U-4 and U-5.

NASD Rule 3070 reiterates this issue and makes the following clear:

(a) Each member shall promptly report to the Association whenever such member or person associated with the member: 

(1) has been found to have violated any provision of any securities law or regulation, any rule or standards of conduct of any governmental agency, self-regulatory organization, or financial business or professional organization, or engaged in conduct which is inconsistent with just and equitable principles of trade; and the member knows or should have known that any of the aforementioned events have occurred; (emphasis added).

(2) is the subject of any written customer complaint involving allegations of theft or misappropriation of funds or securities or of forgery; 

(3) is named as a defendant or Defendant in any proceeding brought by a regulatory or self-regulatory body alleging the violation of any provision of the Act, or of any other federal or state securities, insurance, or commodities statute…
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NASD Rule IM-1000–1 requires reported information with respect to registration of a Registered Representative to be complete and accurate so as to not mislead. A failure in this respect would be “inconsistent with just and equitable principles of trade and when discovered may be sufficient cause for appropriate disciplinary action.”

Many times, clients at brokerage firms have been defrauded by a broker or advisor who had previously defrauded other clients or had been named in multiple arbitration claims but no record is ever made on the broker’s CRD filing. An investor looking to do his or her due diligence on the broker reviews the CRD, sees nothing is disclosed, and assumes the broker is clean. The decision is made to do business with him or her and the client is subsequently defrauded. We have represented multiple clients in FINRA arbitration claims where this exact scenario has occur ed. It is unfortunates but is very common. The New York Times article casts a light on this extremely serious issue.


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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