Failure to Supervise Attorneys – FINRA Rule 3110 Claims

Brokerage firms have a legal duty to supervise their financial advisors. When firms fail to monitor broker activity, investors can suffer significant losses.

Investment Losses from Failure to Supervise?

Under FINRA Rule 3110, firms must establish and maintain systems to supervise their registered representatives. When they fail to do so, investors may have a claim for damages.

The failure to supervise attorneys at The White Law Group represent investors nationwide in recovering losses through FINRA arbitration.

What Is Failure to Supervise? (FINRA Rule 3110)

Failure to supervise occurs when a brokerage firm does not reasonably monitor or control the actions of its brokers.

FINRA Rule 3110 requires firms to:

• Supervise broker recommendations and trading activity
• Establish written supervisory procedures (WSPs)
• Monitor outside business activities
• Ensure compliance with securities laws and regulations

When firms ignore red flags or fail to enforce these procedures, they may be held liable for investor losses.

Common Examples of Failure to Supervise

Failure to Monitor Broker Misconduct

Firms must detect and prevent misconduct such as:

• Unauthorized trading
• Excessive trading (churning)
• Misrepresentations

Inadequate Supervision of Branch Offices

Brokerage firms are responsible for supervising all branch locations and personnel. Weak oversight can allow misconduct to go unchecked.

Failure to Supervise Outside Business Activities

Brokers must disclose outside business activities. Firms must investigate and monitor these activities to protect investors from undisclosed risks.

Failure to Implement Supervisory Procedures

FINRA requires firms to maintain written supervisory procedures (WSPs). If these procedures are:

• Inadequate
• Ignored
• Not enforced

the firm may be liable for resulting losses.

Failure to Conduct Due Diligence

Supervision includes ensuring that investments offered to clients are properly vetted—especially complex or alternative investments.

How Failure to Supervise Leads to Investor Losses

When firms fail to supervise brokers, it often results in:

• Unsuitable investment recommendations
• Overconcentration in risky assets
• Sales of high-commission or illiquid products
• Undetected fraud or misconduct

This is why failure to supervise is often included in broader broker negligence claims.

FINRA Arbitration for Failure to Supervise Claims

Investors typically resolve these disputes through FINRA arbitration, not court.

Through arbitration, investors may recover losses caused by:

• Brokerage firm negligence
• Supervisory failures
• Broker misconduct

Benefits include:

• Faster resolution than litigation
• Industry-experienced arbitrators
• Binding decisions

Why Work with The White Law Group

The White Law Group has extensive experience handling claims involving:

• Failure to supervise
• Broker negligence
• Unsuitable investments
• Alternative investment losses

We understand how to prove supervisory failures and hold brokerage firms accountable.

Free Consultation with a Failure to Supervise Attorney

If you suffered losses due to a brokerage firm’s failure to supervise, you may be entitled to compensation.

Call (888)637-5510 or contact us online for a free consultation.

Frequently Asked Questions

What is FINRA Rule 3110?

FINRA Rule 3110 requires brokerage firms to supervise their brokers and maintain systems designed to ensure compliance with securities laws.

Can a brokerage firm be liable for a broker’s actions?

Yes. Firms can be held responsible if they failed to reasonably supervise the broker.

What is considered a red flag in supervision cases?

Examples include:

• Customer complaints
• Unusual trading activity
• High commissions or turnover
• Outside business activity disclosures

How long do I have to file a claim?

FINRA typically requires claims to be filed within six years of the misconduct.