New York Securities Fraud Lawyers Blog
Despite the weight that a FINRA Bar carries in the financial services industry, investigations show that barred financial professionals have had little trouble remaining employed in the financial services industry. Financial Advisor IQ, along with its sister publication Life Annuity Specialist, is conducting investigations into individuals barred by FINRA who continue to sell financial products, like insurance and annuities, to public investors under state-issued insurance licenses.
The publications have uncovered nearly 350 individuals who are barred by FINRA but maintain active insurance licenses in at least one state. These individuals often continue to sell financial products (other than insurance) to public investors well after they were barred from the industry by FINRA, but when pressed, merely disclose that they are selling “insurance.” If you have been defrauded by a FINRA Barred Broker, you should consult experienced Securities Arbitration Counsel, like the attorneys at Malecki Law in New York.
While insurance regulation varies state by state, some states treat a FINRA Bar as sufficient reason to revoke an individual’s state insurance license. However, other state regulators take a more laissez faire approach, requiring additional misconduct on the part of the barred individual before revoking their insurance license. The inconsistent approach amongst states leaves investors vulnerable to bad actors in the financial services industry.
Explaining the reasons for these inconsistent approaches, Malecki Law Founder, Jenice L. Malecki, Esq. (Ms. Malecki), explained to Financial Advisor IQ that state insurance regulators “don’t have the staff [and] they don’t have the budget” to keep an eye on all FINRA barred brokers operating in their state. If you have been sold defective securities from a broker barred by FINRA, you should contact a seasoned Securities Litigation Lawyer, like the lawyers at Malecki Law in Downtown Manhattan, to determine whether you can bring a case.
Although public investors usually can rely upon FINRA’s BrokerCheck or state licensing websites to conduct due diligence on their state insurance agent, most public investors do not utilize BrokerCheck and some do not even know it exists. As Ms. Malecki explained, “people are going to be as informed as they want to be, as they know how to be, and some will be more informed than others.” Further, FINRA’s customer dispute expungement process, which is granted 81% of the time according to a 2019 study by the Public Investors Advocate Bar Association (PIABA), has made the review process even murkier for investors. If you were sold investments that were not in your best interests, you should speak with an Investor Protection Attorney, like the attorneys at Malecki Law in New York City.
Clearly, State Regulators and FINRA need to do more to keep public investors apprised of “bad actor” brokers who continue providing financial services at the state level. When “disclosure” is the common thread running through all securities regulations, regulators responsible for oversight should be taking extra steps to ensure all relevant information about a particular broker is disclosed to potential clients. Ms. Malecki suggested “that FINRA push the issue by requiring that investors annually receive copies of their financial professional’s BrokerCheck record.” While BrokerCheck and public research are invaluable tools for investors conducting due diligence on their financial professionals, FINRA and State Regulators need to put a heightened focus on ensuring investors do not get taken advantage by FINRA Barred wolves in state insurance producer clothing. Ultimately, it is up to the States to fix this problem.