As a former financial advisor and legal expert with over a decade of experience, I’ve witnessed firsthand the serious consequences that can arise when advisors violate firm policies and ethical standards. The recent case of Nathan Wallace, a financial advisor fired by Savvy for alleged violations, serves as a stark reminder of the importance of integrity and compliance in our industry.
According to Securities and Exchange Commission records, Wallace was terminated by Savvy in August 2024 due to allegations of “violations of the Firm’s written policies and procedures, including its Code of Ethics.” The firm’s internal investigation sought to determine the appropriateness of Wallace’s use of discretionary authority and investment suitability.
The Seriousness of the Allegations
The allegations against Wallace are significant, as they strike at the heart of the trust-based relationship between advisors and their clients. Discretionary authority, which allows advisors to make trades without prior client approval, is a privilege that should never be abused. As FINRA Rule 3260 states, advisors must obtain written authorization from clients and firm approval before conducting discretionary trades.
Misuse of discretionary authority can lead to unsuitable investments, excessive trading, and other practices that prioritize the advisor’s interests over the client’s. Such actions erode the foundation of trust essential to the advisor-client relationship and can result in significant financial harm to investors.
Wallace’s Background and Potential Red Flags
A closer look at Wallace’s background reveals potential red flags. With 11 years of securities industry experience, he has been registered with multiple firms, including Savvy, Greyfox Investors, and Ten Asset Management. While changing firms is not necessarily indicative of wrongdoing, it can sometimes suggest underlying issues or conflicts with management.
Investors should always conduct thorough research on their advisors, including reviewing their FINRA BrokerCheck reports and any publicly available disclosures. In Wallace’s case, his Investment Adviser Public Disclosure form provides crucial details about his termination from Savvy.
Understanding FINRA Rule 3260
FINRA Rule 3260 is designed to protect investors from unauthorized and potentially unsuitable trades. The rule requires advisors to:
- Obtain written authorization from clients before conducting discretionary trades
- Secure firm approval for discretionary accounts
- Maintain records of all discretionary trades
Violations of this rule can lead to disciplinary action, fines, and even suspension or barment from the securities industry. Investors who suspect their advisor has conducted unauthorized trades should promptly contact their firm’s compliance department and consider seeking legal counsel.
Consequences and Lessons Learned
The consequences of violating firm policies and industry regulations can be severe for both advisors and investors. Advisors may face termination, damage to their professional reputation, and legal liabilities. Investors, in turn, can suffer financial losses and emotional distress from entrusting their savings to unethical advisors.
As the saying goes, “Trust takes years to build, seconds to break, and forever to repair.” Cases like Wallace’s underscore the critical importance of due diligence, transparency, and open communication in the advisor-client relationship.
A sobering financial fact: According to a 2021 study by the Association of Certified Fraud Examiners, the median loss caused by fraudulent financial advisors was $295,000. This statistic highlights the devastating impact that unethical advisors can have on unsuspecting investors.
In conclusion, the case of Nathan Wallace serves as a cautionary tale for both advisors and investors. By prioritizing integrity, compliance, and client interests, we can work together to build a stronger, more trustworthy financial services industry. As always, I encourage investors to remain vigilant, ask questions, and thoroughly vet any advisor before entrusting them with their financial future.
