As a financial analyst and legal expert with over a decade of experience, I’ve seen my fair share of regulatory actions and customer complaints against financial advisory firms. One such firm that has been on my radar recently is Cambridge Investment Research Inc., a national financial advisory firm based in Fairfield, Iowa.
According to the Financial Industry Regulatory Authority (FINRA), Cambridge Investment Research (CRD# 39543) has had 16 disclosure events on its broker record, including 12 regulatory events and 4 arbitrations. These events range from mutual fund overcharges to allegations of misconduct by individual advisors.
Mutual fund overcharges and supervisory failures
In December 2024, FINRA censured Cambridge Investment Research for failing to establish and maintain a system reasonably designed to supervise the application of sales charge waivers and fee rebates to which customers were entitled. As a result, the firm agreed to pay restitution of $699,217 plus interest to affected customers. This violation of FINRA Rules 3110 and 2010 highlights the importance of robust supervisory systems in protecting investor interests.
Earlier, in March 2021, Cambridge was fined $400,000 and required to pay restitution of over $3.1 million for failing to reasonably supervise representatives’ recommendations of the LJM Preservation & Growth Fund, an alternative mutual fund that pursued a risky strategy involving uncovered options. The fund lost 80% of its value during a volatility event in February 2018, resulting in significant losses for Cambridge’s customers.
Advisor misconduct and disciplinary actions
Several Cambridge Investment Research advisors have faced disciplinary actions in recent years:
- Sean Michael Kane was barred by the SEC in November 2024 for allegedly deceiving clients about his firing and impersonating them to conduct transactions.
- Edward “Ed” Mercer was barred by FINRA in November 2023 for refusing to appear for on-the-record testimony in connection with an investigation into a customer’s investment in a crypto asset offering away from his member firm.
- Lynn Cawthorne was barred by FINRA in November 2020 after being indicted on felony counts of wire fraud and conspiracy to commit wire fraud in connection with allegedly misappropriating approximately $536,000 from a government program.
As the famous investor Warren Buffett once said, “It takes 20 years to build a reputation and five minutes to ruin it.” These cases serve as a reminder of the importance of thorough due diligence when selecting a financial advisor.
Protecting investor rights
Brokerage firms have a responsibility to adequately supervise their employees and ensure the necessary procedures and systems are in place to detect misconduct. When firms fail to do so, they may be liable for investment losses due to negligent supervision.
Investors who have suffered losses due to unsuitable investments or other forms of broker misconduct may be able to recover their losses through FINRA arbitration. It’s essential for investors to remain vigilant and to thoroughly research any potential investments or advisors before entrusting them with their hard-earned money.
According to a study by Forbes, an estimated $17 billion is lost annually due to investment fraud. This staggering figure emphasizes the importance of working with reputable financial advisors and firms that prioritize investor protection. If you suspect that you have been a victim of investment fraud or have received bad advice from a financial advisor, it’s crucial to seek help from experienced professionals, such as those at Financial Advisor Complaints, who can guide you through the process of recovering your losses.
Did you know that according to a study by the University of Chicago, 7% of financial advisors have been disciplined for misconduct? This statistic underscores the importance of due diligence and the potential risks associated with entrusting your financial future to the wrong advisor.
If you have concerns regarding investments purchased through Cambridge Investment Research Inc. or any other brokerage firm, it’s crucial to speak with a qualified securities attorney to understand your rights and options. Remember, your financial well-being is at stake, and taking proactive steps to protect your investments can make all the difference in securing a stable financial future.
