Written by The White Law Group• August 13, 2024• 2:47 am• FINRA SEC Sanctions, Securities Fraud Articles

Cadaret, Grant & Company: Regulatory History Overview

Cadaret, Grant & Company Overview featured by top securities fraud attorneys, the White Law Group

The White Law Group reviews the regulatory history of Cadaret, Grant & Company.

Cadaret, Grant & Company, Inc. (CRD#: 10641/SEC#: 801-42709,8-27844), a subsidiary of Atria Wealth, is a dual registered broker dealer and investment advisory firm headquartered in Syracuse, New York.

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LPL Financial to Acquire Atria Broker Dealers

Cadaret Grant is among the broker-dealers LPL Financial is acquiring later this year as part of its deal with Atria Wealth Solutions.

In February 2024, LPL Financial Holdings Inc. announced an agreement to acquire Atria Wealth Solutions, Inc., a New York-based wealth management company that supports about 2,400 advisors and 150 banks and credit unions, managing around $100 billion in assets.

Atria, established in 2017, operates a network of broker-dealer subsidiaries nationwide. As part of the deal, Atria’s brokerage and advisory assets will transition to LPL’s platform.

The broker-dealers involved include CUSO Financial Services, Sorrento Pacific Financial, Cadaret Grant, NEXT Financial Group, SCF Securities, Western International Securities, and Grove Point Financial. The agreement, signed on February 12, 2024, is expected to close in the second half of 2024, with the full transition completing by mid-2025, pending regulatory approval.

According to its CRD/Broker report, Cadaret Grant & Company, registered in 1982, has 20 disclosures on its record, including 16 regulatory actions and 4 arbitrations, among others. Regulatory actions taken against a broker-dealer may include censures, fines, suspensions, and restitution, among others. They can have grave consequences for a broker-dealer’s profile and reputation. The following is a review of FINRA and the SEC’s regulatory actions involving Cadaret, Grant & Company.

Cadaret, Grant & Co. Charged with Breaching Fiduciary Duty

The Securities and Exchange Commission (SEC) has initiated administrative and cease-and-desist proceedings against Cadaret, Grant & Co., Inc. for breaches of fiduciary duty. The firm has agreed to pay more than $6 Million.

The alleged violations involved failing to properly disclose conflicts of interest related to third-party compensation from 2017 to 2022. This included receiving revenue sharing payments from a clearing broker for certain mutual fund investments and cash sweeps, as well as markups on transaction fees.

Cadaret Grant also purportedly failed to seek the best execution for its clients and did not adopt adequate compliance policies to prevent these violations. The company has submitted an Offer of Settlement, which the SEC has accepted, without the company admitting or denying the findings.

Failure to Supervise Alleged Ponzi Scheme

July 1, 2020 – FINRA, the securities regulator, fined broker-dealer Cadaret Grant $200,000, accusing the firm of inadequate supervision of a former broker involved in an alleged Ponzi scheme. The firm, without admitting or denying the findings, consented to the fine and censure.

Between April 2014 and March 2017, the firm purportedly failed to reasonably supervise the registered representative, identified as “SP,” in multiple undisclosed private securities transactions related to a Ponzi scheme.

This marks the second time since 2012 that FINRA has sanctioned Cadaret Grant for failure to supervise regarding alleged sales practice violations, resulting in a censure and $200,000 fine.

Cadaret, Grant & Co.: More Supervisory Issues – SEC & FINRA Sanctions

September 2018 – FINRA censured and fined Cadaret Grant & Co. $800,000 for multiple supervisory issues. The firm allegedly failed to establish a reasonably designed supervisory system from August 2012 to May 2017, violating FINRA Rule 3110.

The deficiencies were attributed to inadequate resource allocation, with only three individuals overseeing the securities transactions of over 676 representatives across 450 branch locations.

This is not the first time Cadaret Grant & Co. has faced sanctions from FINRA for failure to supervise, with previous censures and fines in December 2011, May 2015, and December 2016.

Conflicts of Interest

June 28, 2017 – The Securities and Exchange Commission (SEC) settled administrative and cease-and-desist proceedings against Cadaret, Grant & Co., Inc.

The SEC found that from at least 2011 to 2016, the dual-registered broker-dealer and investment adviser violated federal securities laws by failing to disclose its conflict of interest regarding the selection of mutual fund share classes and its practice of retaining prepaid advisory fees from clients terminating their relationship prematurely.

The Commission ordered the firm to pay $3,048,000 in disgorgement, prejudgment interest, and civil money penalties, establishing a Fair Fund to distribute the collected amounts to those harmed.

Improper Variable Annuities Sales to Elderly Clients

March 2012 – Cadaret, Grant & Co. was fined $200,000 by FINRA and ordered to provide restitution to investors for the improper sale of variable annuities to elderly clients. The violation occurred from 2006 to 2008, involving a registered representative who sold unsuitable death benefit riders to 13 elderly clients aged 77 or older.

The death benefit was valid only until age 80, incurring additional fees for the clients despite being ineffective beyond age 81. FINRA noted that the firm overlooked red flags related to the representative, including customer complaints on annuity sales, and as part of the settlement, Cadaret, Grant agreed to rescind the policies’ purchase and offer rebates to affected customers. The firm also committed to a comprehensive review of its policies on the suitability of variable annuities.

Broker Misconduct and Customer Complaints

All broker-dealers have a responsibility to adequately supervise its employees. They must ensure the necessary procedures and systems to detect misconduct. There have been several cases of registered representatives employed by Cadaret, Grant & Co. who were allegedly involved in broker misconduct and fraudulent activities.

January 2020 – Former Cadaret, Grant & Co. financial advisor, Steven Pagartanis, was sentenced to 170 months in prison for a $9 million fraud scheme targeting elderly single women. U.S. District Judge Joan Azrack ordered Pagartanis to be immediately sent to prison due to alleged refusal to provide full financial information and reportedly receiving food stamps without eligibility.

The judge mandated $6.5 million in restitution and three years of supervised release. Pagartanis, accused of targeting elderly investors, allegedly lied about investing their money, using it for personal expenses and running a Ponzi-like scheme. He was reportedly registered with Cadaret, Grant & Co. and barred by FINRA in April 2018.

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

National Securities Attorneys

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.

The Financial Industry Regulatory Authority (FINRA) operates the largest dispute resolution forum in the securities industry. In fact, FINRA Dispute Resolution is the forum for all disputes between investors, brokerage firms and individual brokers. This is because most brokerage firms have mandatory arbitration clauses in their account agreements that require investors to file their disputes through FINRA.

The White Law Group 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 who were defrauded by their financial advisors.

Free Consultation with Securities Attorneys

If you have suffered losses investing with Cadaret, Grant & Company and would like to speak with a securities attorney, please call The White Law Group at 888-637-5510.