As a qualified financial analyst and legal expert, with prominent skills in blending professional and legal financial advice, I, Emily Carter, am bringing to light an important matter that concerns investors. Financial misconduct, particularly in brokerage firms and investment advisory practices, is a matter of grave concern. One such case is lodged against Western International Securities, a registered brokerage firm based in Pasadena, CA, with CRD#: 39262. It is essential that investors are aware of the seriousness of such allegations, their potential impacts, and what these mean in terms of choosing financial advisors.
The Allegations and their Seriousness
According to the released records by the Financial Industry Regulatory Authority (FINRA), Western International Securities previously entered into an AWC with FINRA in which the firm made several admissions. The firm consented to the findings of failing to establish and maintain a supervisory system and written supervisory procedures within the firm. This omission was prevalent from 2013 up to 2022 wherein Western failed to promptly report a significant number of customer complaints, arbitrations, and settlements. In May 2020, the firm failed to disclose 163 liens, judgments, and/or bankruptcies that amounted to more than $5.6 million. The firm’s negligence in meeting these obligations humbly reminds me of a quote by Wiliam Shakespeare, “What is past is prologue.” Lamentably, the past activities of a firm can set a precedent for future behaviors.
The Financial Advisor Background
Financial misbehavior falls on the responsibility of the financial advisors within the firm and their employing brokerage firm. The legal obligation to recommend suitable investments fitting the clients’ needs and goals majorly falls on financial advisors. When these specific duties are breached, a scenario found to be the case in Western International Securities, customers can legally file for recovery of their investment losses. It was discovered that individual agents of Western International Securities excessively traded in specific investor’s accounts.
The FINRA Rule Simplified
The aforementioned case can be misconstrued as a complex concept filled with financial jargon. To simplify, FINRA Rule 2111 calls for quantitative suitability, meaning that a series of recommended transactions even if suitable individually are not excessive when viewed in light of the customers’ investment profile. Western International Securities’ failure to adhere to this rule ultimately led to financial misconduct.
Consequences and Lessons Learned
Western International Securities has faced steep consequences due to its neglect in adhering to regulatory compliance. It’s been censured and fined $475,000 while also ordered to pay restitution of $1,057,632.70. Additionally, they have been subjected to implement a reasonable plan of heightened supervision for its current registered representatives, a consequence of violating FINRA Rule.
Nightly newsletter author, Patrick Watson, once shared a financial fact, stating that “bad financial advisors avoid explaining things”. Investors must heed this advice and ensure to understand all proposed strategies and products. Through the case of Western International Securities, it becomes clear that carefully choosing financial advisors and having an in-depth understanding of your investments can safeguard against potential losses. This case serves as a valuable lesson to investors to remain vigilant and knowledgeable in their investment activities.
