Brokerage Firm Alert: Our Investment Fraud Attorneys Are Investigating Cetera Advisor Networks LLC
Did You Lose Money Because of Cetera Advisor Networks? Are You Aware of Complaints and Fines Against Cetera Advisor Networks?
Updated on: December 21, 2023
Cetera Advisor Networks LLC (“Cetera Advisor Networks”) (CRD # 13572) is a broker-dealer and has been the subject of at least eighteen (18) complaints filed by regulatory organizations like FINRA and many more by investors like yourself. At Patil Law, we have investigated Cetera Advisor Networks, its regulatory complaints and fines, and its customer complaints. If you’ve invested your hard-earned money with Cetera Advisor Networks, you should be very concerned about any regulatory actions, regulatory fines, or customer complaints against your brokerage firm.
Our team of attorneys specialize in representing investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors. As an investor, you may be entitled to compensation for losses accrued due to mismanagement of your investments.
If you believe you have a claim against Cetera Advisor Networks, you should strongly consider hiring an investment fraud lawyer and not wait until it’s too late to file a claim. Reach out to our legal team via the secure and private online form or call our firm directly toll-free at 1-800-950-6553 for a free consultation so that we can discuss your case and see what we can do to help you get the compensation you need and deserve. We do not charge anything for the ability to discuss your matter and evaluate your potential case.
Jump to Topic
Do I Have an Investment Fraud Case Against Cetera Advisor Networks?
Who is Cetera Advisor Networks?
How To File a Claim Against Cetera Advisor Networks To Get Your Money Back
Client Complaints – Is Your Financial Advisor on This List?
Did Misconduct By a Cetera Advisor Networks Advisor Impact Your Investments? What Can You Do?
Cetera Advisor Networks Has Many Regulatory Complaints and Fines
A Closer Look Into Cetera Advisor Networks’ Regulatory Issues
Next Steps and Free Consultation with Our Legal Team
Do I Have an Investment Fraud Case Against Cetera Advisor Networks?
✅ YES, if you’ve experienced financial losses due to the actions or misconduct of Cetera Advisor Networks or its staff, you have the right to pursue legal action against them. You can sue Cetera Advisor Networks but the odds are you signed away your right to sue in court and agreed to resolve your dispute in a FINRA arbitration proceeding.
FINRA arbitration proceedings are generally private proceedings that can last anywhere from a few months to approximately a year. Our attorneys have personal experience in representing clients in FINRA arbitration proceedings and know very well how you can not only sue Cetera Advisor Networks in FINRA arbitration proceedings, but WIN that arbitration. The easiest way to know if you have a case against Cetera Advisor Networks is to reach out to our legal team at Patil Law via the secure and private online form or call us toll-free at 1-800-950-6553 for a complimentary consultation.
Who is Cetera Advisor Networks?
Cetera Advisor Networks (CRD # 13572) is a registered broker-dealer. It operates as a full-service independent broker-dealer, providing a range of financial products and services to individual investors and financial advisors. As a registered broker-dealer, Cetera Advisor Networks is subject to regulations and oversight by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
It is required to comply with industry standards and regulations to ensure the protection of its clients’ interests. A failure to comply with industry standards by either its brokers or the firm itself can result in disciplinary actions, fines, or other penalties imposed by regulatory authorities.
How To File A Claim Against Cetera Advisor Networks To Get Your Money Back
If you have questions about Cetera Advisor Networks, its advisors, or the management or performance of your accounts, please contact our legal team at Patil Law via the secure and private online form or call us toll-free at 1-800-950-6553 for a free and complimentary initial consultation. Our attorneys have experience handling well over a thousand securities arbitration claims, and our law firm has successfully recovered over $25 million for our clients to date.
We understand the stress that comes along with realizing that your financial advisor or brokerage firm has made poor decisions with your money. We can help you, as we have helped hundreds of other clients in the past.
Client Complaints – Is Your Financial Advisor on This List?
There have been scores of customer complaints filed against Cetera Advisor Networks stockbrokers and investment advisors over the years. Many of these complaints deal with financial advisor misconduct, poor or unsuitable investment recommendations, failure by these brokerage firms to supervise their employees (the financial advisors), and general fraud against consumers. We have launched many investigations of current and former Cetera Advisor Networks advisors:
- Richard Casolari with Cetera Advisor Networks (previously with Voya Financial Advisors and Metlife Securities)
- Ronald Metcalf Jr. with Voya Financial Advisors (previously with Cetera Advisor Networks and Cetera Investment Advisers)
- Daniel Morris with Kovack Securities Inc. (previously with Cetera Advisor Networks and Kovack Advisors)
- Justin Marcus with Cetera Advisor Networks (previously with Cetera Investment Advisers and Voya Financial Advisors)
- Ronald Menard with Cetera Advisor Networks (previously with Cetera Investment Advisers and Voya Financial Advisors)
- Lisa Reich-Scholtisek with Cetera Advisor Networks (previously with Cetera Investment Advisers and Voya Financial Advisors)
- Larry Kettle, Jr. with Cetera Advisor Networks (previously with Cetera Investment Advisers and Voya Financial Advisors)
- Matthew Metzger with Cetera Advisor Networks (previously with Cetera Investment Advisers and Voya Financial Advisors)
- Sandy Dorson with Cetera Advisor Networks (previously with Cetera Investment Advisers and Voya Financial Advisors)
- Brock Brady currently unaffiliated (previously with Cetera Advisor Networks and Voya Financial Advisors)
- Erik Alexander with Cetera Advisor Networks (previously with Cetera Investment Advisers and Voya Financial Advisors)
- Danny Young with Kovack Securities (previously with Cetera Advisor Networks and Voya Financial Advisors)
- David Casparian with LPL Financial (previously with Cetera Advisor Networks and Financial Network Investment Corporation)
- Robert Brian Wolfe currently unaffiliated (previously with Cetera Advisor Networks and Goldman Sachs & Co.)
- David Aaron Rockwell currently barred (previously with Cetera Advisor Networks and Suntrust Investment Services)
- Scott Vincent Kaup currently unaffiliated (previously with Cetera Advisor Networks and Cetera Investment Advisers)
- Diana Plucienkowski with Cetera Advisor Networks (previously with Cetera Investment Advisers and Summit Financial Group)
- Robert Berg with Cetera Advisor Networks (previously with Cetera Investment Services and Summit Financial Group)
- Kathleen Almulla currently unaffiliated (previously with Cetera Advisor Networks and Summit Brokerage Services)
- Barry Debany with Cetera Advisor Networks (previously with Cetera Investment Advisers and Walnut Street Securities)
- H. Brock Seibold with LPL Financial (previously with Cetera Advisor Networks)
- Brian Shey currently unaffiliated (previously with Cetera Advisor Networks and Green Vista Capital)
- Russell Nieland with Cetera Advisor Networks (previously with LPL Financial and TD Ameritrade)
- Robert Rogers Jr with Cetera Advisor Networks (previously with Cetera Investment Advisers and Walnut Street Securities)
- Charles Alan Valenzuela with Cetera Advisor Networks (previously with Cetera Investment Advisers and Walnut Street Securities)
- Sandra White currently unaffiliated (previously with Goldman Sachs & Co. and Cetera Advisor Networks)
- James Anderson currently unaffiliated (previously with Cetera Advisor Networks and Northwestern Mutual Investment Services)
- Phillip Bracey with Cetera Advisor Networks (previously with Cetera Investment Advisers and Columbine Securities)
- Gary Meagher with LPL Financial (previously with Cetera Advisor Networks and Linsco/Private Ledger Corp.)
- Gordon Quan with Cetera Advisor Networks (previously with Financial Designs Corporation)
- Michael David currently unaffiliated (previously with Cetera Advisor Networks and LPL Financial LLC)
- Kirk Knollman with TCFG Wealth Management (previously with Cetera Advisor Networks and TCFG Investment Advisors)
- Michael Schwartz with Ameriprise Financial Services (previously with Cetera Advisor Networks and Royal Alliance Associates)
- James Story with Cetera Advisor Networks (previously with Cetera Investment Advisers and Summit Financial Group)
- Albert Campbell III with Cetera Advisor Networks (previously with Cetera Investment Advisers and WSA Affiliates)
- Callen Bryan with Cetera Advisor Networks (previously with Cetera Investment Advisers and LPL Financial)
- Darin Arnell with Cetera Advisor Networks (previously with Financial Network Wealth Advisors and Goldman, Sachs & Co.)
- Frank Parker with Cetera Advisor Networks (previously with Stifel, Nicolaus & Company, Incorporated and Janney Montgomery Scott)
- James Franklin with Independent Financial Group (previously with Cetera Advisor Networks and 1st Global Advisors LLC)
- Jason Comes currently unaffiliated (previously with Cetera Advisor Networks and LPL Financial)
- Jeffrey Meyers with Cetera Investment Advisers (previously with Cetera Advisor Networks and Summit Financial Group)
- Jonathan Bever with Cetera Advisor Networks (previously with Fulcrum Wealth Advisors and Cetera Investment Advisers)
- Michael Bell with Cetera Advisor Networks (previously with Cetera Investment Advisers and Sunamerica Securities)
- Nathan Sampler Sr. currently unaffiliated (previously with Cetera Advisor Networks and The Investment Center)
- Norman Robbins with Ameriprise Financial Services (previously with Cetera Advisor Networks and Summit Financial Group)
- Victor Aponte-Echevarria with Cetera Advisor Networks (previously with Cetera Investment Advisers and MML Investors Services)
- Clarence Patton Jr. currently unaffiliated (previously with Cetera Advisor Networks and Summit Brokerage Services)
- Robert Burns with Cetera Advisor Networks (previously with Cetera Investment Advisers and Summit Financial Group)
- Thomas Brennan III with Cetera Advisor Networks (previously with Cetera Investment Advisers and Voya Financial Advisors)
- Edward Rosenblatt with Cetera Advisor Networks (previously with Cetera Investment Advisers)
Did Misconduct By a Cetera Advisor Networks Advisor Impact Your Investments?
If you have lost money investing with any of these Cetera Advisor Networks advisors or others within this brokerage firm, it’s important that you reach out to an investment loss attorney quickly because the statutes of limitations can bar your claims. Call our legal team at Patil Law toll-free at 1-800-950-6553 or reach out to us via the secure and private online form for a free initial consultation.
Cetera Advisor Networks Has Many Regulatory Complaints and Fines
There have been approximately eighteen (18) state and self-regulatory body disclosure events against Cetera Advisor Networks; that is, final and formal proceedings initiated by a regulatory authority like the U.S. Securities and Exchange Commission (SEC) or self-regulatory body like the Financial Industry Regulatory Authority (FINRA) for a violation(s) of investment-related rules or regulations. In addition, there have been countless customer complaints filed against Cetera Advisor Networks for misconduct by its securities sales and investment advisory representatives that are not reported by the firm on its Central Depository Record.
Our legal team at Patil Law has reported and written about these regulatory problems and customer complaints over many years. A few of the notable FINRA Sanctions for its Supervisory Failures are below.
A Closer Look Into Cetera Advisor Networks’ Regulatory Issues
Cetera Advisor Networks has been repeatedly censured, warned, and fined for its own misconduct and failure to supervise its army of financial advisors. Details of eighteen (18) regulatory issues are listed below:
Fined $30,000 for Alleged Supervisory Failures In Registering Its Investment Adviser Representative (IAR) (Docket/Case Number: R-2023-0010)
Overview from FINRA’s Disciplinary Office:
Massachusetts Securities Division alleged Cetera Advisor Networks LLC failed to register its investment adviser representative (“IAR”) who had a place of business in Massachusetts and ensure that its IAR was properly registered in Massachusetts prior to providing investment advisory services.
Fined $300,000 for Alleged Supervisory Failures In Protecting Customer Records and Information (Docket/Case Number: 3-20490)
Overview from FINRA’s Disciplinary Office:
The Securities and Exchange Commission (The “Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) and sections 203(e) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”), against Cetera Advisor Networks LLC, Cetera Advisors LLC, Cetera Investment Services LLC, Cetera Financial Specialists LLC, and Cetera Investment Advisers LLC (Together, “Cetera Entities” or “respondents”).
The Commission finds that these proceedings arise out of Cetera Entities’ failure to adopt written policies and procedures reasonably designed to protect customer records and information, in violation of rule 30(a) of regulation S-P (“Safeguards Rule”) and, with respect to Cetera Advisors LLC and Cetera Investment Advisers LLC, failure to adopt and implement reasonably designed procedures for review of communications sent to impacted clients in violation of Section 206(4) of the Advisers Act and Rule 206 (4)-7 thereunder.
The Safeguards Rule requires every broker-dealer and every investment adviser registered with the Commission to adopt written policies and procedures reasonably designed to: (1) insure the security and confidentiality of customer records and information; (2) protect against any anticipated threats or hazards to the security or integrity of customer records and information; and (3) protect against unauthorized access to or use of customer records or information that could result in substantial harm or inconvenience to any customer.
Cetera Entities are registered with the Commission as broker-dealers, investment advisers, or both. Between November 2017 and June 2020, email accounts of over 60 Cetera entities’ personnel were taken over by unauthorized third parties resulting in the exposure of over 4,388 of Cetera entities’ customers’ Personally Identifiable Information (“PII”) stored in the compromised email accounts. At the time, none of these accounts had multi-factor authentication (“MFA”) turned on, even though Cetera Entities’ own policies required MFA “wherever possible,” beginning in 2018. Although these email account takeovers do not appear to have resulted in any unauthorized trades or transfers in brokerage customers’ or advisory clients’ (“customers”) accounts, Cetera Entities violated the Safeguards Rule because their policies and procedures to protect customer information and to prevent and respond to cybersecurity incidents were not reasonably designed to meet these objectives, specifically as applied to independent contractor representatives and offshore contractors. Cetera Entities had a significant number of security tools at their disposal that allowed them to implement controls that would mitigate these higher risks. However, Cetera Entities failed to use these tools in the manner tailored to their business, exposing their customers’ PII to unreasonable risks.
Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder require a registered investment adviser, or an investment adviser required to register, to adopt and implement written compliance policies and procedures reasonably designed to prevent violations, by the adviser or its supervised persons, of the Advisers Act and the rules adopted by the commission thereunder. Cetera Advisors LLC (“Cetera Advisors”) and Cetera Investment Advisers LLC (“Cetera Investment Advisers”) violated section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder by failing to adopt and implement reasonably designed policies and procedures regarding review of communications to advisory clients. This failure resulted in sending breach notifications to the firms’ clients that included misleading template language suggesting that the notifications were issued much sooner than they actually were after the discovery of the incidents.
Fined $199,000 for Alleged Involvement in Dishonest or Unethical Behavior (Docket/Case Number: SD-18-0014)
Overview from FINRA’s Disciplinary Office:
The Division alleged respondent engaged in dishonest or unethical practices under Section 61-1-6(2)(a)(II)(g) of the Utah Uniform Securities Act (Act) and failed to reasonably supervise under section 61-1-6(2)(a)(II)(j) of the act.
Fined $300 for Alleged Supervisory Failures In Disclosing Administrative Action (Docket/Case Number: 17-0254-DEN)
Overview from FINRA’s Disciplinary Office:
Cetera Advisor Networks Applied for renewal of its nonresidential business entity insurance producer license on or about March 20, 2017, with the Oklahoma Insurance Department (OID). On the application form, the second question asks the following: “Has the business entity or any owner, partner, officer or director of the business entity, of manager or member of a limited liability company, ever been named or involved as a party in an administrative proceeding, including a Financial Industry Regulatory Authority (FINRA) sanction or arbitration proceeding regarding any professional or occupational license, or registration?” Cetera Advisor Networks answered “no” to this question. A background check conducted by the OID licensing division showed that Cetera Advisor Networks (can) had the following administrative action listed on its record: an administrative action by the Commonwealth of Massachusetts Office of the secretary of the Commonwealth Securities Division. CAN entered into a consent order on January 27, 2017 regarding failure to register advisor representatives with the Commonwealth. CAN was ordered to cease and desist, and fined one hundred fifty thousand dollars ($150,000). Accordingly, CAN did not properly disclose the aforementioned administrative action in the license application.
Fined $150,000 for Alleged Supervisory Failures In Registering Investment Adviser Representatives Conducting Business In Massachusetts (Docket/Case Number: 2016-0123)
Overview from FINRA’s Disciplinary Office:
Commonwealth of Massachusetts alleged failure to register investment adviser representatives who had a pace of business in Massachusetts and ensure investment adviser representatives were properly registered with the Commonwealth.
Fined $82,260 for Alleged Employing an Unregistered Agent (Docket/Case Number: AP-10-38)
Overview from FINRA’s Disciplinary Office:
The enforcement section of the Missouri Securities Division has alleged that Financial Network Investment Corporation employed an unregistered agent in violation of Section 409.4-402(d).
Fined $185,000 for Alleged Supervisory Failures In Filing Amendments On Time (Docket/Case Number: CAF040112)
Overview from FINRA’s Disciplinary Office:
Article V, Sections 2(c) and 3(b) of NASD’s bylaws, NASD rules 2110, 3010, 3070 – Financial Network Investment Corp. filed 130 late amendments to forms U4 and U5, representing approximately 74% of the required amendments relating to reportable customer complaints, terminations, regulatory actions, and criminal disclosures. The firm’s supervisory system and procedures were not reasonably designed to achieve compliance with its article V reporting obligations. NASD also found late filings of, and failures to file, disclosures of customer complaints in accordance with NASD Rule 3070 and failures to file form U4 amendments relating to a customer complaint.
Fined $10,000 for Alleged Supervisory Failures In Registering One Branch Office (Docket/Case Number: 1795-S-11/92)
Overview from FINRA’s Disciplinary Office:
State of Florida alleged that the Financial Network failed to complete registration of one branch office with the State.
Fined $10,000 for Alleged Pendency of Order & Stipulation (Docket/Case Number: 92.352.DOS)
Overview from FINRA’s Disciplinary Office:
On 11-10-92, the State of Florida, entered a notice of intent to deny the three branch office applications filed by Financial Network Investment Corporation for locations in Deerfield Beach, Boca Raton, and Altamonte Springs. The denial was based upon the determination that the dealer is the subject of a pending enforcement action. The denial is not final and is subject to appeal.
Fined $125,000 for Allegedly Causing Representatives Share Private Customer Data With a Third-Party Vendor (AWC No. 2020066875501)
Overview from FINRA’s Disciplinary Office:
Between October 2019 and July 2020, Cetera caused 26 registered representatives, whom the firm was recruiting, to take nonpublic personal customer information from the firms where the representatives were then registered and to disclose it to a third-party vendor without the other broker-dealers’ or the customers’ knowledge or consent, causing those broker-dealers to violate the SEC’s Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Information (Regulation S-P). As a result, Cetera violated FINRA Rule 2010.
Fined $1,000,000 for Alleged Supervisory Failures In Supervising Private Securities Transactions by Their Dually-Registered Representatives (DRRs) (AWC No. 2015046716901)
Overview from FINRA’s Disciplinary Office:
From January 2011 through December 2018, Networks and Advisors, and from November 2012 through January 2018, Specialists (the relevant time periods) each failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to supervise certain private securities transactions conducted by their dually-registered representatives (DRRs) at unaffiliated or “outside” registered investments advisors (RIAs). By early 2018, these DRRs managed more than $80 billion in customer assets across more than 47,000 accounts.
The Cetera Firms were aware of the supervisory deficiencies- they were identified in Securities and Exchange Commission (SEC) examinations in July 2013, August 2015, and September 2017—yet, despite several efforts to address such deficiencies, failed to implement systems and procedures to reasonably supervise the transactions. Networks, Advisors, and Specialists’ failure to supervise the DRRs’ participation in private securities transactions violated NASD Rule 3040(c) and FINRA Rules 3280(c) and 2010.1In addition, the firms’ failures to establish, maintain and enforce reasonable supervisory systems and written supervisory procedures violated NASD Rules 3010(a) and (b) and FINRA Rules 3110(a) and (b) and 2010.
Networks, Advisors, and Specialists also failed to make and preserve related books and records in violation of NASD Rule 3110 and FINRA Rules 4511 and 2010.
Fined $700,000 for Alleged Supervisory Failures In Addressing Red Flags of Unsuitable Mutual Fund Switching and Unsuitable Stock Trading Intended to Conceal the Switching (AWC No. 2014040951702)
Overview from FINRA’s Disciplinary Office:
Between January 2009 and January 2015 (the “Relevant Period”), CAN failed to respond reasonably to red flags of unsuitable mutual fund switching, and unsuitable stock trading intended to conceal the switching, by one of its registered representatives, MK. MK’s misconduct spanned six years; occurred in the accounts of 14 customers, including seniors; involved hundreds of unsuitable mutual fund switches and related stock trades; and caused nearly $700,000 in customer losses.
Although CAN’s supervisory system detected red flags indicative of MK’s misconduct as early as 2012, the Firm failed to reasonably respond to three audit reports and hundreds of electronic trading system alerts that flagged the short-term trading patterns as problematic. In particular, even though MK’s two Series 24 designated supervisors (the “Designated Supervisors”) detected and passed on their findings of potentially unsuitable trading via annual audit reports to the Firm’s home office, the Firm failed to take disciplinary action against MK. No one in the home office reviewed or acted upon those findings. In this instance, the Firm did not read, and thus failed to respond reasonably, to the audit reports it received detailing the potential misconduct. During the same period that the audits and trading alerts were flagging MK’s trading activity as problematic, the Firm was giving sales awards to MK for his high production.
MK’s Designated Supervisors were registered with FINRA through the Firm, but were employed by an outside company that provided back office and compliance support to the Firm’s registered representatives (the “Outside Company”). The Firm allowed the Designated Supervisors to be managed by a sales manager (the “Sales Manager”), who was also an employee of the Outside Company and was registered with FINRA only as an Investment Company and Variable Contracts Products Representative, and not as a General Securities Principal. Although the Designated Supervisors also reported directly to the Cetera Home Office Supervision Department, the Firm did not establish a reasonable system to ensure that the Sales Manager, who lacked a supervisory principal license and had an indirect interest in MK’s financial production, did not interfere with the Designated Supervisors’ supervisory responsibilities. FINRA found that, in one instance, the Sales Manager directed that a Designated Supervisor not send MK a letter of reprimand for problematic trading that the Designated Supervisor had discovered.
Only after FINRA began its investigation did the Firm take action against MK, terminating his registration by a Uniform Termination Notice for Securities Industry Registration (“Form U5”) filed in February 2015.
By virtue of the foregoing, the Firm failed to reasonably supervise MK and failed to establish and maintain a supervisory system and procedures reasonably designed to identify and prevent unsuitable mutual fund switching and unsuitable stock trading in customer accounts in violation of NASD Rule 3010(a)3and FINRA Rules 3110(a) and 2010.
Fined for Allegedly Disadvantaging Certain Retirement Plan and Charitable Organization Customers Eligible for Class A Shares Purchase Without Front-End Sales Charge (AWC No. 2016050258801)
Overview from FINRA’s Disciplinary Office:
Between July 1,2009, and January 1,2017 (the “Relevant Period”), CAN disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a frontend sales charge (“Eligible Customers”). These Eligible Customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. During this period, CAN failed to establish and maintain a supervisory system and procedures reasonably designed to ensure that Eligible Customers who purchased mutual fund shares received the benefit of applicable sales charge waivers. As a result, CAN violated NASD Conduct Rule 3010 (for misconduct before December 1, 2014), FINRA Rule 3110 (for misconduct on or after December 1, 2014), and FINRA Rule 2010.
Fined $750,000 for Alleged Supervisory Failures In Identifying Red Flags in the Sale of Multi-Share Class Variable Annuities (“VAs”) (AWC No. 2015045234401)
Overview from FINRA’s Disciplinary Office:
This case concerns the Cetera Firms’ failure to establish, maintain, and enforce a supervisory system reasonably designed to identify red flags in the sale of multi-share class variable annuities (“VAs”). Between January 2013 and December 2014 (the “Relevant Period”), the Cetera Firms earned a substantial portion of their revenues from the sale of VAs, and specifically the sale of L-share VA’s (“L-share contracts”). L-share contracts typically provide a shorter surrender period, of three to four years, than B-share contracts, which typically have a surrender period of 7 years. Insurance companies design L-share contracts so that customers pay a higher fee for the benefit of a shorter surrender period. L-share contracts are designed for investors with short-term time horizons or who want the optionality of being able to surrender the L-share contract sooner than a B-share contract. Pursuant to the terms established by the insurance company manufacturers, if a purchaser chooses not to surrender an L-share contract during the surrender period, the purchaser continues to pay a higher annual fee for the life of the contract, unless the contract provides for a “persistency credit.”‘
During the Relevant Period, current customers of CAN, FAS, SBS and VSR collectively purchased approximately 2,900 L-share contracts together with one of two long-term riders. ?he first of these riders, frequently known as the Guaranteed Minimum Income Benefit Rider (GMIB), provides for the added benefit of guaranteed income for life. The second, frequently known as the Guaranteed Minimum Withdrawal Benefit Rider (GMWB), provides for the added benefit of guaranteeing a minimum amount the customer will be able to withdraw from the contract over time (the riders are collectively referred to as the “Long-Term income Riders”). Long-Term Income Riders are often utilized by investors with long-term time horizons and cost purchasers additional annual fees in exchange for the added benefits. Moreover, because of the potentially incompatible time horizons, L-shares with Long-Term Income Riders may present a red flag that the purchase may not be suitable for a customer’s investment objectives and time horizon. In addition, many of the customers who purchased L-share contracts from the Cetera Firms stated that they had a long-term investment horizon, which should have been a red flag given the short-term nature of L-shares. CAN, FAS, SBS and VSR failed to identify and investigate these red flags, and as a result, violated FINRA Rules 2330(c), NASD Rule 3010 (for conduct before December 1, 2014), FINRA Rule 3110 (for conduct on and after December 1, 2014) and FINRA Rule 2010.
Moreover, none of the Cetera Firms had systems that were sufficient to review for VA share classes or to identify potential patterns of unsuitable sales. The Cetera Firms also failed to provide their registered representatives and principals with adequate training and guidance on suitability considerations for multi-share class VAs. Even though VAs accounted for more than approximately 20% of the Cetera Firms’ revenues during the Relevant Period, the Cetera Firms failed to establish and maintain an adequate supervisory system and procedures to ensure suitability of its VA sales and VA share class recommendations. As a result, CAN, CFS, FAS, SBS, and VSR violated FH\IRA Rules 2330(d) and (e), NASD Rule 3010 (for conduct before December 1,2014), FINRA Rule 3110 (for conduct on and after December 1,2014) and FINRA Rule 2010.
In addition, CAN (during the period April 2011 to June 2013), CFS (during the period July 2013 to July 2015) and VSR (during the period January 2013 to February 2015) failed to reasonably supervise VA exchanges in that they each failed to implement a reasonable supervisory system and procedures to determine if any of their registered representatives had inappropriate rates of VA exchanges. CAN, CFS, and VSR’s failure to have reasonable surveillance systems to detect inappropriate rates of exchange constitutes separate violations of FINRA Rule 2330(d), NASD Rule 3010 (for conduct before December 1, 2014), FINRA Rule 3110 (for conduct on and after December l, 2014)and FINRA Rule 2010.
Finally, FAS failed to establish, maintain and enforce a reasonable supervisory system and procedures relating to: (1) the sale of structured products (during the period October 2006 through January 2012); (2) the sale of non-traditional exchange-traded funds (during the period October 2011 through August 2013); and (3) the use of consolidated account reports (CARs) and retention of books and records in the context of certain CARs (during the period October 2011 through August 2013). As a result, FAS violated NASD Rules 3010 and 2110, (for the time period from October 2006 to December 14,2008), and FINRA Rule 2010 (for the time period from December 15, 2008 to August 2013).
Fined $150,000 for Alleged Supervisory Failures In Applying Sales Charge Discounts to Certain Customers’ Eligible Purchases of Unit Investment Trusts (“UITs”) (AWC No. 2014041838501)
Overview from FINRA’s Disciplinary Office:
From May 1, 2009 to April 30, 2014 (the ‘Relevant Period”), CA Networks failed to apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts (“UITs”) in violation of FINRA Rule 2010. In addition, CA Networks failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to ensure that customers received sales charge discounts on all eligible UIT purchases in violation of NASD Conduct Rule 3010 and FINRA Rule 2010.
Fined $40,000 for Alleged Supervisory Failures In Advising FINRA Regarding Changes to Information on Certain Branch Offices Listed on the Firm’s Form BR (AWC No. 2011025788201)
Overview from FINRA’s Disciplinary Office:
The Firm did not promptly advise FINRA regarding changes to the information regarding certain branch offices registered with and listed on the Firm’s Form BR with FINRA. The Firm also failed to establish, maintain and enforce a supervisory system and written supervisory procedures to ensure that information on the Form BR on file with FINRA for each branch office was accurate, and promptly updated to reflect changes within 30 days. As a result, the Firm violated Article IV, Section 8 of the FINRA By-Laws, NASD Rules 3010(a) and 3010(b), and FINRA Rule 2010.
Fined $10,000 for Alleged Supervisory Failures In Failing To Timely Report To Trace Transitions In Trace-Eligible Securities Executed On A Business Day (AWC No. 2005000178302)
Overview from FINRA’s Disciplinary Office:
NASD Rules 2110, 3010, 6230(A) – Financial Network Investment Corp. failed to report to trace transitions in trace-eligible securities executed on a business day during trace system hours within 45 minutes of the time of execution; and the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to applicable securities laws, regulations and NASD rules concerning reporting of transactions in trace-eligible securities.
Fined $3,415,000 for Allegedly Having A Revenue Sharing Program Called The Strategic Partners Platform For Mutual Fund Sales In Retail Stores (AWC No. EAF0400760002)
Overview from FINRA’s Disciplinary Office:
NASD Rules 2110 and 2830(k)(1) – respondent maintained a shelf space (revenue sharing) program known as the strategic partners platform in connection with retail sales of mutual funds. In return for payments, mutual funds complexes that participated in the program received preferential treatment from the firm in the sales and marketing of their funds. The program provided increased access to the firm’s retail brokerage sales force, placement of materials on the firm’s websites, identification as a strategic partner on the ITS Intranet Websites including links to the strategic partners’ website and payment of ticket charges for retail brokerage sales of strategic partners’ funds. Some mutual fund complexes made payments for participating in the program by directing approximately $12.5 million in mutual fund portfolio brokerage commissions to the firm through clearing brokers.
Next Steps and Free Consultation with Our Legal Team
If you have questions about Cetera Advisor Networks, its advisors, or the management or performance of your accounts, please contact our team at Patil Law toll-free at 1-800-950-6553 for a free initial consultation. Or please reach out to us through our secure and private contact form and we will call you back quickly to discuss your case.
Our attorneys have experience handling well over a thousand securities arbitration claims, and our law firm has successfully recovered over $25 million for our clients to date. We understand the stress that comes along with realizing that your financial advisor or brokerage firm has made poor decisions with your money.
We can help you, as we have helped hundreds of other clients in the past. We are happy to serve you as well as to provide you with a custom report of your advisor’s and your brokerage firm’s complaints.