Allegation’s Seriousness, Case Information, and How it Affects Investors
Cantor Fitzgerald & Co., a powerhouse in the global financial world, recently found itself in a storm of allegations. The US Securities and Exchange Commission (SEC) accused this renowned financial services firm of misleading statements to investors. The parent company, Cantor Fitzgerald L.P., allegedly caused two of its Special Purpose Acquisition Companies (SPACs) to make false claims in their registration statements for initial public offerings (IPOs).
Notably, these SPACs asserted that they had not engaged with or identified potential merger targets, a requirement dictated by SEC regulations. However, the SEC alleges they were in fact holding discussions with two private companies, namely View Inc. and Satellogic Inc, which they later merged with. Deceptive maneuvers such as these can lead to significant investment losses and erosion of trust in the investing community.
Lucky Luciano, a prominent figure in organized crime once said, “There’s no such thing as good money or bad money. There’s just money” Yet, the $750 million these SPACs garnered in IPOs, plus the $6.75 million civil penalty Cantor Fitzgerald agreed to pay, make it quite clear that the distinction between ‘good’ and ‘bad’ is more than just perception, but a grim reality concerning this case’s seriousness.
Fact: According to FINRA, of the 634,403 brokers, only about 7% have at least one disclosure event in their record. Disclosures typically involve past felonies, regulatory actions or having been terminated for cause – all red flags for investors.
The Financial Advisor’s Background, Broker Dealer, and Any Past Complaints
Cantor Fitzgerald & Co. is a registered broker-dealer under SEC and a proud member of FINRA. Based in New York, the company operates globally to provide a plethora of financial services. While its reputation precedes itself, the recent allegations are far from the first time the company has been under scrutiny.
Information provided on Cantor Fitzgerald & Co’s public records shows that the firm has a history of 94 disclosures. These include regulatory actions, past customer complaints, and other consequential occurrences that have been reported. Unfortunately, these disclosures raise concerns about the firm’s credibility and trustworthiness.
The pattern of behaviors seen in previous cases points to a regular failure to meet regulatory requirements, ranging from rule violations to misleading statements. Between July 2017 and May 2019, the company reportedly failed to meet best execution obligations, resulting in compromised customer returns. This failure resulted in a $100,000 fine, alongside restitution costs. Access the full report by entering the CRD# 134/SEC# 8-201 on FINRA’s BrokerCheck.
Explanation in Simple Terms and the FINRA Rule
FINRA Rule 5310 imposes a profound obligation upon broker-dealers to execute customer transactions at the most favorable possible terms, given prevailing market conditions. Rule 3110(a) mandates that firms must establish and maintain systems to supervise activities of their associated personnel to achieve compliance with applicable securities laws. Finally, FINRA Rule 2010 requires broker-dealers and associated persons to uphold high standards of commercial honor and just and equitable principles of trade.
By failing to integrate OTC Link messages into their order management system, Cantor Fitzgerald & Co. failed to provide the best possible returns to its customers. Also, the firm’s supervisory system was deemed inadequate as it excluded important reviews that could have ensured better customer pricing and compliance with regulations.
Consequences and Lessons Learned
The consequences of such regulatory allegations go beyond monetary penalties. Integrity is the backbone of the financial industry, and once trust is eroded, it’s challenging to rebuild.
Unsurprisingly, the fallout from the recent allegations bears significant repercussions. Cantor Fitzgerald & Co has reportedly agreed to pay over $1.1 billion in combined penalties linked to failure in preserving electronic communications. The companies admitted to the facts and started implementing improvements in their compliance policies and procedures.
Moreover, the Cantor Fitzgerald saga underscores the importance of due diligence for investors. Broker-dealers have a legal and ethical duty to work in the best interests of their clients. Thus, investors should monitor their financial advisors and the activities of brokerage firms for red flags.
In conclusion, the Cantor Fitzgerald & Co case is a cautionary tale, serving to reinforce the timeless wisdom that “trust takes years to build, seconds to break, and forever to repair”.
