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FINRA Fines Cetera Advisor Networks $1.4 Million Over Churning Allegations

Cetera Advisor Networks

Publicly available records provided by the Financial Industry Regulatory Authority (FINRA) and news reports accessed on January 4, 2018 indicate that FINRA has sanctioned Cetera Advisor Networks and fined the firm $1.4 million in connection to allegations it failed to supervise a registered representative’s excessive trading. Fitapelli Kurta is interested in hearing from investors who have complaints regarding Cetera Advisor Networks (CRD# 13572).

According to an Investment News report published on December 20, 2018, FINRA has issued the firm a fine of $700,000 and ordered it to pay about $691,800 in restitution. The action stems from allegations that an unidentified broker “made hundreds of short-term purchases and sales of A-share mutual funds in the accounts of 14 customers,” per the report, which notes that some of these customers were senior. The broker in question received new front-end commissions associated with each transaction, benefiting the representative and Cetera while causing the customers to lose almost $700,000 over six years, according to the report. The broker also reportedly attempted to conceal the churning activities “via stock trading between mutual fund sales and purchases.” He had been barred from the securities industry in 2017 in connection to allegations he failed to comply with a FINRA investigation of his activities.

Investment News reports further that FINRA alleged Cetera failed to reasonably respond to red flags stemming from the representative’s activities, and that the firm awarded him sales awards in 2013 and 2014 despite his supervisors’ flagging of excessive trading. According to Investment News, Cetera Advisor Networks “only took action against the broker, in February 2015, after FINRA began an investigation” stemming from an external tip.

A letter of Acceptance, Waiver and Consent associated with the sanction states that although the broker’s supervisors conducted audits that detected his unsuitable trading, these supervisors “were not empowered to fire or take other significant disciplinary action on their own,” which is why the firm did not address the activities raised in their reports. FINRA also states that the firm failed to have a reasonable supervisory system overseeing his supervisors “that provided back office and compliance support to the firm’s registered representatives,” and specifically that the firm “permitted a non-supervisors employed by an outside company” to have control of the supervisors in connection to supervisory matters.

In connection with these allegations, FINRA censured Cetera Advisor Networks and issued it a fine of $700,000. The firm was ordered to pay restitution of $691,755.27 as well as interest to affected customers, and ordered to certify that it has “established and implemented policies, procedures and internal controls reasonably designed to address and remediate” the issues concerned in the action.

If you or someone you know has complaints regarding Cetera Advisor Networks, call Fitapelli Kurta at 877-238-4175 for a free consultation. You may be eligible to recoup your losses. Fitapelli Kurta accepts all cases on a contingency basis: we only get paid if and when you collect money. Time to file your claim may be limited, so we encourage you to avoid delay. Call 877-238-4175 now to speak to an attorney for free.

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