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Cambridge Investment Research to Pay $500,000 Restitution in FINRA Fee Review

As a financial analyst and writer, I’ve come across many instances where investment firms fall under scrutiny. That’s exactly what’s happened with Cambridge Investment Research. Following a review by the Financial Industry Regulatory Authority (FINRA), the company was found to be inconsistent in granting fee waivers, rebates, and discounts through reinstatement rights to customers. Now, they’ve agreed to repay affected clients to the tune of $500,000 by 2024.

For me, these findings set off alarm bells. It suggests that Cambridge may have neglected their duty to honor these rights for certain clients, and this casts a shadow of doubt over their operations that potential and existing investors should be wary of. After all, “The investor’s chief problem—and even his worst enemy—is likely to be himself,” as Benjamin Graham famously said. This situation could be an illustration of that.

Peeling back another layer, it’s worth noting Cambridge anticipated this payout. As mentioned in the firm’s [Focus Report], they expect the FINRA’s investigation might dig deeper than initially thought. That’s a red flag for investors—ongoing scrutiny often means increased risk.

But it’s not the only trouble Cambridge is facing. Last year, the Securities and Exchange Commission (SEC) took action against the company’s RIA. The accusation? They allegedly prioritized their financial gain over their clients’ interests by funneling assets into certain funds that kicked back revenue-sharing payments, rather than choosing lower-cost alternatives. You can read more about this in the SEC’saccusation document.

Let’s simplify what “rights of reinstatement” mean. Essentially, it’s your right as an investor to put money back into a mutual fund within a certain period without paying extra sales charges. If these rights weren’t upheld, it would mean investors paid more than necessary. That’s hardly fair, is it?

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To the individual investor, these sort of actions are worrying. They point to not just isolated incidents but potentially widespread problems within Cambridge. It’s crucial to remember that if you’re being advised to make certain financial moves that don’t align with your goals or notice fees that don’t make sense, these could be signs of bad advice. A financial fact that might interest you is the disturbing reality that, according to reports, the harm caused by bad financial advisors averages at nearly $17 billion of misused retirement funds yearly.

Regulatory bodies like FINRA and the SEC work to protect us from such unjust practices. When investment firms fail to maintain ethical standards, it can lead to unforeseen financial damage. But you’re not without recourse. You can, for example, seek to recover your losses through FINRA’s arbitration process, which you can check by asking advisors for their FINRA CRM number to verify their credentials.

To wrap up, your due diligence is paramount when working with financial advisors. Always keep an eye on their dealings, because market ups and downs aren’t the only risks to your financial health. Unethical behavior and malpractice can have serious effects on the wellbeing of your portfolio.

And so, I encourage you to stay vigilant, stay informed, and stay invested!

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