Cambridge Investment Research: Lawsuits, Regulatory Overview

The White Law Group reviews the regulatory history of Cambridge Investment Research Inc. 

The White Law Group continues to investigate securities claims involving Cambridge Investment Research, (CRD# 39543, Fairfield, Iowa). Cambridge, a national financial advisory firm headquartered in Fairfield, Iowa, reportedly has 17 disclosure events on its broker record including 13 regulatory events, and 4 arbitrations, according to the Financial Industry Regulatory Authority (FINRA).

Regulatory actions taken against a broker-dealer may include censures, fines, suspensions and restitution, among others. They can have serious consequences for a broker-dealer’s profile and reputation. The following is a review of FINRA and the SEC’s regulatory actions involving Cambridge Investment Research.

Cambridge’s Affiliated Advisory Firm to pay $15 Million

March 20th, 2025: The SEC obtained a final judgment against Cambridge Investment Research Advisors, Inc.  for failing to disclose conflicts of interest and breaching its fiduciary duty. Since at least 2014, the firm allegedly invested client assets in mutual funds and money market sweep funds that generated revenue-sharing payments to its affiliated broker-dealer, Cambridge Investment Research, Inc., instead of lower-cost alternatives. It also converted client accounts to higher-cost wrap accounts without proper disclosure or analysis of their best interests.

Without admitting or denying the allegations, the firm consented to a judgment enjoining it from further violations and agreed to pay $15 million in disgorgement, interest, and penalties. The SEC dismissed its relief defendant claim against Cambridge Investment Research Inc.

Mutual Fund Overcharges

December 20th, 2024: FINRA has reportedly censured Cambridge Investment Research for customer overcharges. The firm will reportedly pay restitution of $699,217 plus interest to affected customers.  Between January 2015 and March 2022, Cambridge Investment Research failed to establish and maintain a system reasonably designed to supervise the application of sales charge waivers and fee rebates to which customers were entitled through rights of reinstatement offered by mutual fund companies.  Cambridge Investment Research violated FINRA Rules 3110 and 2010.

Broker Misconduct and Customer Complaints  

All broker-dealers have a responsibility to adequately supervise its employees. There have been several cases of registered representatives employed by Cambridge Investment Research who were allegedly involved in broker misconduct and fraudulent activities.

SEC Bars Sean Michael Kane after Allegations of Misconduct

November 13th, 2024: The SEC has reportedly barred Sean Michael Kane, a financial advisor from Philadelphia, for allegedly deceiving clients about his firing and purportedly impersonating them to conduct transactions, according to a press release. 
Kane was reportedly affiliated with Cambridge Investment Research in York, PA from March 2021 until March 2023 when he was purportedly terminated.

Cambridge Investment Broker Edward Mercer Barred 

November 15, 2023: FINRA, the self-regulator that oversees brokers and brokerage firms, has reportedly barred financial advisor Edward “Ed” Mercer (CRD#: 1839328). Mercer reportedly refused to appear for on-the-record testimony requested by FINRA in connection with its investigation into a customer’s investment in a crypto asset offering away from his member firm.

Cambridge Fined for LJM fund Sales

March 17, 2021: According to FINRA, Cambridge failed to reasonably supervise representatives’ recommendations of an alternative mutual fund—the LJM Preservation & Growth Fund (LJM). Cambridge purportedly permitted the sale of LJM on its platform without conducting reasonable due diligence and without a sufficient understanding of its risks and features. The fund pursued a risky strategy that relied, in part, on purchasing uncovered options.

Cambridge also reportedly lacked a reasonable supervisory system to review representatives’ LJM  recommendations. Cambridge representatives reportedly sold more than $18 million in LJM to customers. LJM’s value dropped 80% during an extreme volatility event in February 2018 and the fund ultimately liquidated and closed, resulting in millions of dollars in losses for Cambridge’s customers. Cambridge was reportedly required to pay a $400,000 fine and restitution of $3,134,354.82 plus interest.

Lawsuits involving LJM Funds

The White Law Group represented investors in  LJM Preservation and Growth Fund, a mutual fund targeted to retail investors which lost half its value earlier that month as volatility in trading spiked, according to numerous reports. The fund then lost most of its  remaining value soon after.

FINRA Sanctions Cambridge for Alleged Customer Overcharges and Excess Commissions 

December 2019: Cambridge Investment Research was issued an AWC on December 31, 2019 in which the firm was censured and fined $150,000 after the firm allegedly failed to reasonably supervise short-term trading of UITs and mutual fund Class A shares.

FINRA’s findings also stated that the firm’s system for  monitoring commissions failed. Some of the firm’s representatives apparently executed transactions that allegedly resulted in $17,124 in excess commissions on trades entered by firm representatives, and a single trade in which the commission amount of $25,000 was entered in error.

Cambridge Advisor Lynn Cawthorne Barred after Alleged Felony 

November 16, 2020: The Financial Industry Regulatory Authority (FINRA) reportedly barred ex-Cambridge financial advisor Lynn Cawthorne after Cawthorne was indicted in the U.S. District Court for the Western District of Louisiana on seven felony counts of wire fraud and one felony count of conspiracy to commit wire fraud in connection with allegedly misappropriating approximately $536,000 from a government program.

According to his broker profile, Cawthorne was reportedly affiliated with Cambridge Investment Research Co. in Shreveport, LA, from 2013 until 2018 when he was reportedly dismissed after he “failed to report ongoing criminal investigation.”

Filing a Lawsuit against your Brokerage Firm

All broker-dealers have a responsibility to adequately supervise its employees. They must ensure the necessary procedures and systems to detect misconduct.  Brokerage firms 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.

Class Action Lawsuit vs. Individual FINRA Arbitration Lawsuit

You may wonder whether a large class action lawsuit is a better litigation option than an individual FINRA arbitration case.  The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option.  Class action lawsuits as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually.

Free Consultation with a Securities Attorney

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Seattle, Washington.

If you have concerns regarding investments losses with Cambridge Investment Research Inc. you may be able to file a FINRA lawsuit. Please call The White Law Group at 888-637-5510 for a free consulation.