FINRA Rule 3110
For an investor to select a broker to handle their financial future, it takes a lot of confidence and trust. Although there are many brokers who understand this duty and treat it with the paramount respect and care that it deserves, some brokers use investors’ lack of sophistication and financial experience for their own profit and gain. At the Law Office of Steve A. Buchwalter, our Los Angeles securities fraud lawyer has assisted numerous clients with seeking justice after they have been burned by their brokers. One of the types of cases that we handle pertains to violations of FINRA Rule 3110. This key federal regulation requires brokerage firms and financial outfits to create,maintain and enforce a supervisory system to manage their employees and to ensure compliance with securities laws. If you have been burned by your broker and believe that a lack of adequate supervision was responsible, we are ready to assist you.Brokerage Firms Have Major Responsibilities Under FINRA 3110
Financial Industry Regulatory Authority (FINRA) Rule 3110 obligates each brokerage firm to create, enforce, and maintain a system of supervision for all of its employees, overseeing their activities and ensuring that the firm complies with securities rules, regulations, and laws at the federal and state levels. Many of the complex provisions contained in this rule focus exclusively on eliminating any potential for fraud or misconduct.
The first key provision of FINRA Rule 3110 requires the brokerage firm to put its supervisory management system in writing so that there is no dispute about what is required and expected at the firm. Next, firms are required to select “appropriately registered principal(s)” to handle the supervision requirements for each category of business that the firm handles. The duty to supervise extends not only to individual associates but also to the firm’s activities and practices as a whole. Some of the matters that principals must evaluate include the qualifications of associates, business transaction compliance, and outside activities that may affect associates’ and the firm’s business obligations. Other requirements include holding an annual compliance meeting, registering an office of supervisory jurisdiction that has final approval on structuring new offerings, approving new accounts, and reviewing customer orders, as well as retaining detailed records.Seek Compensation for Preventable Financial Losses
If you have lost money or suffered financial harm as a result of a firm’s failure to supervise, you may be entitled to compensation. Since many investors lack the same knowledge, expertise, and experience that brokers possess, the law holds brokers and brokerage firms to the highest duty of fiduciary care when it comes to advising investor clients and handling their finances. This includes ensuring that investors understand the potential risks of financial decisions, making decisions that will achieve and maintain an investor client’s goals, and refraining from misrepresenting any information or concealing any material facts that the investor client would want to know when making a decision.
If the investor can show that the broker failed to adhere to this fiduciary duty, the investor is entitled to receive the difference between the estimated value of their accounts without the negligent conduct and the current value of the accounts after the negligent conduct. If the investor can show that the broker engaged in willful, malicious, or intentionally fraudulent conduct, moreover, the investor may seek punitive damages, which are an additional category of damages designed to punish defendants for egregious conduct and to deter others from engaging in similar behavior.Seek Advice from a Knowledgeable Broker Fraud Lawyer in Los Angeles
You spend a great deal of time contemplating your future and ensuring that your family and you will have the financial resources that you need. Trusting a broker may be a daunting decision, particularly if you are making major financial decisions and lack substantial knowledge about the financial markets. Los Angeles attorney Steve A. Buchwalter has assisted people throughout Southern California, including in Beverly Hills, Pasadena, Irvine, Newport Beach, Ventura, and Santa Barbara. We offer a free consultation to help you learn about your legal rights, so call us now at (818) 501-8987 or contact us online to set up your appointment with a broker negligence lawyer.