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May 11, 2016 at 01:16 PM
WASHINGTON — Two senators sent a letter today asking the Financial Industry Regulatory Authority (FINRA) to tell them what the agency is doing to address patterns of misconduct by financial advisors outlined in a recent FINRA study.
Sens. Elizabeth Warren, D-Mass., and Tom Cotton, R-Ark., sent the letter.
“Patterns of misconduct highlighted in the study are concerning,” the senators wrote. “The risks to investors posed by advisors with a disciplinary history are disturbing, but they are not unpredictable…”
They asked FINRA to provide information about steps it is taking to address high levels of advisor misconduct and recidivism, as well as steps it is taking to address the problem of firms that employ advisors with a history of misconduct.
The greatest concern voiced in the letter is that the study found that misconduct “persists, in part,” because of ineffective sanctions for advisors.
According to the study, the letter said, only about half of the advisors who committed misconduct lost their job, and 44 percent of those obtained a job at another advisory firm within a year.
“Perhaps more disturbing, about one-third of all advisors with a misconduct record are repeat offenders — and these past offenders are five times more likely to engage in misconduct than the average advisors.
It added that, “FINRA is responsible for addressing the risks posed by these brokers and firms so that investors can obtain the scrupulous, high-quality financial advice they deserve.”
The study found “high rates” of misconduct among advisors under FINRA’s supervision, and revealed ineffective sanctions for this misconduct. It called the wrongdoing “pervasive.”
