The White Law Group reviews the regulatory history of Commonwealth Financial Network.
Commonwealth Financial Network Inc. (CRD#: 8032) a FINRA registered independent broker-dealer based in Waltham, Massachusetts which reported revenue of $2 billion in 2022.
The following is a brief breakdown of publicly available information regarding Commonwealth Financial Network and its securities sales practices and FINRA regulatory history. FINRA is the self-regulator that oversees brokers and brokerage firms.
FINRA’s BrokerCheck provides information about brokerage firms and individual brokers registered with the Financial Industry Regulatory Authority (FINRA) Regulatory actions reported on BrokerCheck provide details about disciplinary actions taken by FINRA or other regulatory authorities against brokers or brokerage firms.
According to its FINRA BrokerCheck report, Commonwealth has a large number of disclosures including 26 regulatory actions, 1 civil event, 17 arbitrations and 1 bond. To access Commonwealth Financial Network’s full CRD, you can visit https://brokercheck.finra.org.
Regulatory actions can include censures, fines, suspensions, or even the revocation of a broker’s license. These actions indicate instances where the broker or firm has engaged in misconduct or failed to meet regulatory requirements.
Arbitration is a dispute resolution process commonly used in the securities industry. BrokerCheck may report arbitration awards related to customer disputes. These awards typically indicate the outcome of arbitration proceedings, which could result in financial compensation for aggrieved customers. The presence of multiple arbitration awards against a broker or firm can indicate a history of unresolved customer complaints or poor conduct.
Commonwealth Financial Network Broker Misconduct and Customer Complaints
There have been several cases of registered representatives employed by Commonwealth Financial Network who were allegedly involved in broker misconduct and fraudulent activities. Broker dealers are required to supervise their employees. If they fail to do so they may be held liable through a FINRA arbitration claim.
In October 2020, the Securities and Exchange Commission barred former Commonwealth Financial broker, Gerald Eaton, after he pled guilty to stealing more than $3.7 million from his clients.
According to his BrokerCheck profile, Eaton was affiliated with Commonwealth for 24 years until he was reportedly fired in October 2019 for “forgery and wrongful taking of property.” FINRA barred Eaton one month later for failing to provide documents and information in connection with their investigation of the above allegations.
Between August 1999 and October 2019, Eaton engaged in an alleged scheme to steal “money and property from investment accounts and insurance policies that he controlled and managed on behalf of his clients.”
Eaton allegedly forged client signatures on checks and other documents, and to avoid detection, often misappropriated funds of ill and/or elderly clients. On September 30, 2020, Eaton pled guilty to one count of wire fraud, one count of mail fraud, and one count of aggravated identity theft in the US District Court for the District of Mass.
In May 2019, former Commonwealth Financial broker Benjamin Bourgeois, Jr. was arrested after authorities say he allegedly stole more than $359,000 from a 78-year-old client.
According to reports, the victim was a client of Bourgeois’ for about 10 years. Bourgeois was a financial advisor for the woman’s late husband and had reportedly been considered a family friend.
Bourgeois was reportedly registered with Commonwealth Financial Network in Metairie, LA from 2015 – 2019. He has four customer complaints on his broker record.
FINRA Rule 3110 Supervision
The Financial Industry Regulatory Authority (FINRA) has several rules in place to regulate broker-dealers, including the FINRA Rule 3110 Supervision rule. 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.
Broker-dealers are required to designate an appropriately qualified supervisor who is responsible for the supervision system.
The rule further requires firms to develop written supervisory procedures (WSPs) that are reasonably designed to achieve compliance with applicable securities laws and regulations, as well as FINRA rules. Then they must implement the WSPs effectively and ensure that they are followed by all associated persons.
FINRA Rule 3110 also requires that broker-dealers establish a process for identifying and responding to red flags that may indicate potential violations or misconduct by associated persons. This includes conducting periodic reviews of customer accounts and transactions, as well as monitoring communications (e.g., email, social media) to detect potential violations.
The SEC Charges Commonwealth with Conflicts of Interest
On August 1, 2019, the Securities and Exchange Commission (SEC) charged broker-dealer Commonwealth Financial Network with failure to disclose material conflicts of interest related to revenue sharing Commonwealth received for certain client investments.
Commonwealth allegedly made several material omissions leading its advisory clients to invest without a full understanding of the firm’s compensation motives and incentives, according to the SEC’s complaint.
Between July 2014 and December 2018, Commonwealth allegedly received over $100 million in revenue sharing from the broker related to client investments in certain share classes of “no transaction fee” and “transaction fee” mutual funds.
The SEC charged Commonwealth with breaching its fiduciary duty by failing to tell its clients there were lower priced options available.
FINRA Sanctions Commonwealth Financial Network for Overcharges
FINRA sanctioned Commonwealth Financial Network for overcharging retirement plan investors via mutual fund share classes in November 2019.
According to a Letter of Acceptance, Waiver and Consent, FINRA found that between 2009 and 2017, Commonwealth was responsible for overcharging mutual fund investors by $766,295.
Commonwealth has paid $888,337 in restitution to eligible customers after FINRA recognized the firm for cooperating and for conducting its own internal review of mutual fund overcharging in 2015.
According to the AWC, certain Commonwealth retirement plan and charitable organization customers who were eligible to purchase class A share mutual funds without front-end sales loads were sold funds with loads or with higher ongoing fees and expenses.
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 traditional litigation.
If your broker has defrauded you, you may be able to file a FINRA claim against your brokerage firm. 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 the 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 and will represent you at the arbitration hearing, present evidence and make arguments on your behalf. They may be able to negotiate a settlement for you before going to arbitration.
Hiring a Securities Attorney
If you have any questions about investments you made with Commonwealth Financial Network or if you believe that you have been the victim of securities fraud, The White Law Group may be able to help. To contact the firm, please call 888-637-5510
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.
Although our offices are in Seattle, Washington and Chicago, Illinois, the firm reviews securities fraud cases throughout the country. For more information on The White Law Group, please visit https://whitesecuritieslaw.com.
Tags: Benjamin Bourgeois, broker-dealer review, Commonwealth Financial Network, failure to supervise, finra sanctions, Gerald Eaton, SEC charges Last modified: May 16, 2023