Failure to Supervise

Did Negligence or Misconduct Cause You Financial Loss?

Financial and securities brokerage firms have a legal duty to supervise their brokers. This is to ensure compliance with and prevent violations of the rules of the security industry. When an individual broker is negligent or acts in an unlawful manner against the interests of the client and that client suffers damages as a result of such wrongdoing, the firm may be held liable for the investor’s losses because of what is known as “failure to supervise.”

A brokerage firm’s supervisory responsibilities include many areas. These include securities recommendations that are made to customers, a broker’s outside business activities, and private securities transactions engaged in by the broker. In addition, brokers are required to complete standardized training and pass exams administered by the FINRA. If it is found that a brokerage firm did not properly train a broker or did not ensure the broker obtained the necessary licenses, then the brokerage firm may be held legally responsible for failure to supervise..

Failure to Supervise Claims

There are many scenarios in which you could have a failure to supervise claim against the brokerage firm. In many cases, the brokerage firm is solely responsible for financial losses.

Compliance Required with These FINRA Rules

FINRA rules state that a brokerage firm must have reasonable systems and procedures in place to monitor employees and protect against investment fraud and other misconduct. Each firm must keep a written copy of its policies at each office that is designated an office of supervisory jurisdiction, and also must designate a supervisor.

Among other things, FINRA rules require compliance with the following (as examples):

  • Pre-Hire Screening.Brokerage firms should conduct a check of the agent’s background before hiring them. Has the agent changed firms often? Does he or she have a disciplinary history?
  • Periodic Reviews and Inspections. On a regular basis, the individual brokers with a firm should participate in a meeting to discuss their compliance with FINRA rules. In addition, each individual office should be inspected regularly to detect and prevent violations of the securities laws and industry rules.
  • Monitoring Communications of Individual Brokers. This covers both communications with existing customers, and communications with potential customers, such as advertising.
  • Monitoring Customer Information and Transactions. This is often monitored by a computer system that will alert a supervisor to suspicious activity.
  • Training and Licensing. A firm should monitor that its individual brokers are licensed to sell securities, and are current on required training.

Contacting a Securities Fraud Attorney

Proving a failure to supervise claim requires a thorough investigation of the facts surrounding your claim and a diligent attention to detail. Fortunately, the lawyers at Meyer Wilson have spent decades of collective experience in practicing in the area of investment fraud law. Because our practice is devoted to serving the victims of investment negligent and fraudulent stockbrokers, we have the necessary resources and insight to aggressively investigate and pursue your case. Our securities fraud attorneys have recovered over $350 million on behalf of our clients and have the experience and skill to represent your interests. Contact us today for a free consultation. We will fight for you!