FINRA Regulation of Rogue Brokers: Too Little, Too Late?

CHICAGO - Jan. 3, 2017 - PRLog -- Although a lot of Main Street investors have never heard of the Financial Industry Regulatory Authority (FINRA), FINRA is the independent, non-governmental agency that licenses and regulates stockbrokers and brokerage firms in the United States. What most investors also often do not realize is that FINRA's budget is largely paid for by the very brokerage firms it regulates - creating a fairly obvious conflict of interest.

Although FINRA requires brokers and brokerage firms to report customer complaints and disputes, as well as regulatory sanctions, it is fair to question whether FINRA is doing the best job possible to rid the industry of "rogue brokers."

7.28 percent of advisors have at least one disclosure in their industry records for a settled consumer complaint or other reportable event, according to a 2016 academic study, "The Market for Financial Adviser Misconduct" (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2739170) by Mark Egan from the University of Minnesota, and Gregor Matvos and Amit Seru from the University of Chicago.

The academic study found that after misconduct is discovered 48 percent of brokers get fired, and after being fired, 44 percent get rehired in the industry within a year.

But what there does not appear to be solid statistics on are the number of advisors that remain in the industry despite numerous customer complaints.  Where is FINRA's regulation of these individuals?

"We often represent clients whose advisors have been sued 10+ times and our clients are shocked that the regulators have allowed these people to continue to operate in the securities industry.  Failure to expel these individuals erodes the credibility of the industry and the trust that good advisors are constantly struggling to engender," commented Daxton White, managing partner of The White Law Group, a national securities fraud, securities arbitration, and investor protection law firm.

Although there are likely many more examples, here are just a few advisors that FINRA allowed to operate in the securities industry despite many, many customer complaints:

-  William W. Gammon (CRD# 1811853) Currently registered with Ameriprise. 25 customer complaints.

-   Kathleen Tarr (CRD # 4215307)  12 years in the securities industry without any FINRA investigations.  44 customer complaints.

-  Craig G. Langweiler (CRD# 841897) Currently registered at Meyer & Associates. 13 customer complaints.

-  Andrew Yocum (CRD# 4590723) 13 years in the securities industry before FINRA barred him.  25 customer complaints.

-  William Tatro (CRD# 808176) 35 years in the securities industry before FINRA barred him. 78 customer complaints.

-  John Towers (CRD #700221) 15 years in the securities industry before FINRA suspended him.  44 customer complaints.

-  Dennis Van Patter (CRD#1364583) 30 years in the securities industry before FINRA suspended him.  6 customer complaints.

-   Ray Lucia (CRD # 1073284) 10 years in the securities industry before SEC investigated him.  24 customer complaints.

-   Dawn Bennett (CRD #1567051) 10 years in the securities industry before SEC investigated her.  12 customer complaints.

-   Ralph Saviano (CRD #1081879) 25 years in the securities industry before FINRA barred him.  17 customer complaints.

-   James Robert Glover (CRD#1296755) 27 years in the securities industry before barred.  81 customer complaints.

-   Barry G. Hartman (CRD# 1361232) 29 years in the securities industry before barred.  17 customer complaints.

-   Jerry Cicolani (CRD# 2170580) 22 years in the industry before FINRA barred him. 73 customer complaints.

"I can tell you from experience that many of these people destroyed lives.  Whether it is a budgetary problem, or a genuine lack of real interest on the part of FINRA to properly regulate the advisory industry, it can certainly be debated. However, what I think is quite clear is that instances of rogue brokers are far too commonplace and FINRA's regulation of such brokers is often too little too late." said Daxton White, of The White Law Group.

FINRA should have the ability to identify advisors by number of customer complaints.  At what point should they institute a mandatory review of an advisor's business practices - 5 customer complaints? 10? 20?  At what point is FINRA regulation of the industry too little too late?

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group and its representation of investors in FINRA arbitration claims, visit http://www.whitesecuritieslaw.com.