Prospera Financial Services Inc. Regulatory History Overview

The White Law Group reviews the regulatory history of Prospera Financial Services Inc.  

Prospera Financial Services Inc. (CRD#: 10740/SEC#: 801-65845,8-28164), headquartered in Dallas Texas, is a dual registered national financial advisory firm with $82 Million in revenue in 2021. It is one of the fifty largest independent brokerage firms in the US, according to data from Investment News. According to FINRA, the firm reportedly has 14 disclosures on its broker record including 10 regulatory actions, 3 arbitrations and 1 bond. 

Regulatory actions taken against a broker-dealer may include censures, fines, suspensions and restitution, among other sanctions. They can have serious consequences for a broker-dealer’s profile and reputation.   

Arbitrations on a broker-dealers CRD (Central Registration Depository) refer to the resolution of disputes between a broker-dealer and a client or between broker-dealers themselves through the FINRA arbitration process. When a client or another broker-dealer files a complaint against a broker-dealer, the complaint may be resolved through arbitration, which is a process where an independent third party (the arbitrator) hears both sides of the dispute and makes a binding decision.   

Prospera Financial Services Inc. Customer Complaints, Broker Misconduct 

All broker-dealers have a responsibility to adequately supervise their employees. They must ensure the necessary procedures and systems to detect misconduct.  Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.   

When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration.    

There have been several cases of registered representatives employed by Prospera Financial Services Inc. who were allegedly involved in broker misconduct and fraudulent activities.  

FINRA Bars Prospera Financial Broker 

FINRA reportedly barred ex-Prospera Financial Services advisor, Harlan Cardwell III (Tra Cardwell) in all capacities on May 3, 2019 after he failed to respond to a request for information relating to his termination from his firm. He also reportedly failed to respond to two Notice of Suspension letters from the regulator. 

According to his broker report, Cardwell was reportedly affiliated with Prospera Financial Services Financial Services in Vernon, Texas from 2004 to 2018 until he was discharged for “Violation of firm policy and procedure regarding accepting loans from a client.” 

In 2015, FINRA reportedly suspended and fined a Prospera broker $25,000 for allegedly excessive trades and unsuitable investments in three client accounts, which resulted in a combined realized loss of over $135,000. 

FINRA has rules in place regarding excessive trading, which is also known as churning. Churning refers to the practice of a broker or financial advisor excessively trading securities in a client’s account for the purpose of generating commissions, without regard for the client’s investment objectives. 

FINRA Rule 2111(a) establishes the “suitability” standard, which requires brokers to recommend only those investments that are suitable for a particular client based on their investment objectives, risk tolerance, financial situation, and other factors. A broker who engages in excessive trading may be in violation of this rule. 

In addition, FINRA Rule 2121(a) prohibits brokers from making recommendations that are excessive considering the customer’s investment objectives, financial situation, and needs. This means that a broker cannot recommend a high frequency of trades if it is not appropriate for the customer’s investment goals. 

FINRA also found that the broker used improper exercise of discretion by executing trades outside of the same-day window requirement without first obtaining written authorization by the customer and written acceptance of this arrangement by the firm. He also reportedly accepted third-party discretion without written authorization by the client. 

The SEC Sanctions Prospera Financial Services Inc.  

Prospera Financial Services has 10 regulatory actions on its broker report, such as the following: 

The SEC reportedly filed charges against Prospera Financial Services in 2016 for allegedly making misstatements to certain of its advisory clients, including clients with separately managed accounts invested in F-Squared Investments, Inc.’s strategy. Prospera allegedly advertised the strategy by negligently relying on F-Squared’s materially inflated, and hypothetical and back tested, performance track record that F-Squared allegedly misrepresented. 

The agency ordered Prospera to cease and desist and to pay $100,000 as a civil penalty. 

This is not the first time the SEC filed charges against Prospera Financial. The agency filed enforcement actions against Prospera Financial and three other firms as far back as 2000. The firm was ordered to pay $30,000 and agreed to a censure after they allegedly failed to adequately supervise brokers in remote branch offices. 

The Securities and Exchange Commission said that altogether, customers of the four firms were swindled out of $3.5 million by brokers who made unauthorized trades in their clients’ accounts, traded accounts excessively to increase their commissions, or simply stole customers’ money. 

Supervisory Failures: Prospera Financial 

FINRA has also reportedly censured and fined Prospera Financial Services, Inc. and required the firm to revise its Written Supervisory Procedures. The findings stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to the applicable securities laws and regulations, and FINRA rules. (FINRA Case #2014040008801). 

FINRA has several rules in place to regulate broker-dealers, including the supervision rule, FINRA Rule 3110. This rule requires broker-dealer firms to establish and maintain a system to supervise the activities of their associated persons (e.g., brokers) to ensure that they comply with securities laws and regulations. 

FINRA BrokerCheck – easy way to check your broker or Brokerage Firm 

Regulatory Disclosures on a firm’s broker report or CRD may contain information on any past disciplinary actions taken against the brokerage firm or its representatives, such as fines, suspensions, or revocations of licenses. This can provide insights into the firm’s compliance record. 

The FINRA BrokerCheck tool is a free online tool provided by the Financial Industry Regulatory Authority (FINRA) that allows investors to research and verify the background and credentials of financial brokers, brokerage firms, and investment advisors registered with FINRA. 

Using FINRA BrokerCheck, investors can make informed decisions about the suitability of a particular broker or brokerage firm for their investment needs,and can also report any suspected fraudulent or unethical behavior. The tool is widely used by individual investors, institutional investors, and industry professionals to research and evaluate potential investments and investment opportunities. 

FINRA Attorneys for Investment Losses    

When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration. FINRA arbitration is generally a faster and less expensive alternative to a traditional litigation. 

If your broker has defrauded you, you may be able to file a claim with FINRA to seek resolution through arbitration. FINRA arbitration can be a complex and technical process, and having an experienced attorney who is knowledgeable about securities law can greatly increase your chances of success.     

The FINRA attorneys at the White Law Group can help you with many aspects of the arbitration process including evaluating the merits of your claim and determining whether you have a strong case for arbitration.     

The White Law Group can assist you in drafting a statement of claim that accurately reflects the allegations of fraud and the damages you are seeking. They will also represent you at the arbitration hearing, present evidence and make arguments on your behalf.     

They can also negotiate a settlement on your behalf, which may be an option to consider before going to arbitration.     

    
National Securities Attorneys – the White Law Group        

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.           

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.            

With over 30 years of securities law experience, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions attempt to recover their investment losses.            

Free Consultation

If you have concerns regarding investments you purchased through Prospera Financial Services Inc. and would like to speak with a securities attorney, please call The White Law Group at 888-637-5510.