As a former financial advisor and legal expert with over a decade of experience, I’ve seen my fair share of cases where advisors have allegedly violated industry rules. The recent investigation into Marc Harrison’s conduct is a prime example of the seriousness of such allegations and the potential consequences for both advisors and investors.
The Seriousness of the Allegations and Their Impact on Investors
According to FINRA records, Marc Harrison, a co-founder and broker at Reid & Rudiger in New York City, is under investigation for allegedly violating FINRA Rules 3110 and 2010 “for supervision concerning excessive trading and churning.” These allegations, if proven true, could have severe consequences for Harrison and the firm, as well as any investors who may have been affected by the alleged misconduct.
Excessive trading and churning refer to the practice of a broker making frequent trades in a client’s account, often to generate commissions for the broker rather than to benefit the client. This can lead to significant losses for investors, as well as unnecessary fees and taxes. As such, it is considered a serious violation of industry rules and can result in disciplinary action against the broker and their firm.
For investors who may have been affected by Harrison’s alleged misconduct, the investigation serves as a reminder of the importance of regularly reviewing their accounts and questioning any unusual or excessive trading activity. It also highlights the need for due diligence when choosing a financial advisor, including researching their background and any past complaints or regulatory actions.
Marc Harrison’s Background and Past Complaints
According to his BrokerCheck report, Marc Harrison has 37 years of experience in the securities industry and has been registered with Reid & Rudiger since 1999. The firm’s website describes him as a co-founder and Chief Investment Strategist, responsible for analyzing a wide range of investments and asset classes.
While Harrison’s extensive experience may be seen as a positive by some investors, it’s important to note that he has been registered with several other firms throughout his career, including:
- Emmett A. Larkin Company
- Gruntal & Company
- Rosenkrantz Lyon & Ross
- North American Investment Corporation
- LF Rothschild & Company
- Shearson Lehman Brothers
This is not uncommon in the industry, but it does raise questions about why he has moved firms so frequently and whether there have been any issues or complaints at his previous employers.
Understanding FINRA Rules 3110 and 2010
The allegations against Marc Harrison involve violations of FINRA Rules 3110 and 2010. But what do these rules actually mean for advisors and investors?
FINRA Rule 3110 requires firms to establish and maintain a system of supervision that is reasonably designed to achieve compliance with applicable securities laws and regulations. This includes having written supervisory procedures, designating supervisors, and conducting regular reviews of customer accounts.
FINRA Rule 2010, on the other hand, requires brokers to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business. This broad rule covers a range of unethical or improper conduct, including excessive trading and churning.
In simpler terms, these rules require brokers and their firms to act in the best interests of their clients and to have systems in place to detect and prevent misconduct. Violations of these rules can lead to serious consequences, including fines, suspensions, and even permanent bars from the industry.
The Consequences and Lessons Learned
The potential consequences of the allegations against Marc Harrison are significant. If the allegations are proven true, he could face disciplinary action from FINRA, including fines, suspensions, or even a permanent bar from the industry. Reid & Rudiger could also face consequences, including fines and reputational damage.
For investors, the case serves as a reminder of the importance of being vigilant and proactive in monitoring their investments and the conduct of their advisors. As the famous investor Warren Buffett once said, “Risk comes from not knowing what you’re doing.”
One startling fact that highlights the prevalence of misconduct in the financial industry is that, according to a 2019 study by the Stanford Law School, one in thirteen financial advisors has a record of misconduct. This underscores the need for investors to thoroughly vet their advisors and to stay informed about their investments.
As a former financial advisor and legal expert, my advice to investors is to always ask questions, request explanations for any trades or decisions made on their behalf, and to regularly review their account statements. If something doesn’t seem right, don’t hesitate to raise concerns with your advisor or their firm, and if necessary, file a complaint with regulators like FINRA.
While the vast majority of financial advisors are honest and ethical professionals, cases like the allegations against Marc Harrison serve as a sobering reminder of the need for constant vigilance and due diligence in the world of investing.
