Independent Financial Group: Complaints & Regulatory Actions

Independent Financial Group LLC Regulatory History Overview

The White Law Group reviews the regulatory history of Independent Financial Group LLC.

Independent Financial Group, LLC (CRD#: 7717, San Diego, CA), headquartered in San Diego, California, is dually registered as an investment adviser and broker-dealer.

According to its CRD/FINRA BrokerCheck report, the firm has 16 disclosures on its record, including 13 regulatory events and 2 arbitrations, among others. 

FINRA, the regulator that oversees brokers and brokerage firms, and the Securities and Exchange Commission may impose regulatory actions against a broker-dealer such as censures, fines, suspensions and restitution, among others. Regulatory actions can have serious consequences for a broker-dealer’s profile and reputation. The following is a review of the regulatory history of Independent Financial Group LLC. 

Supervisory Failures

Excessive Trading and Regulation Best Interest

September 25, 2024: FINRA reportedly censured and fined Independent Financial Group $500,000 for alleged supervisory failures. Between July 2020 and December 2022, IFG failed to establish, maintain, and enforce a supervisory system reasonably designed to supervise actively traded accounts and achieve (Regulation BI or Reg BI) and FINRA Rule 2111 as they pertain to excessive trading.

During that same period, the firm also reportedly failed to reasonably supervise a registered representative who excessively traded five customers’ accounts in violation of FINRA Rules 3110 and 2010. Additionally, between September 2022 and April 2024, IFG made late and incomplete responses to a FINRA Rule 8210 request in violation of FINRA Rules 8210 and 2010. In addition to the censure and the fine, the firm was reportedly ordered to remediate the issues.

VP of Supervision Suspended and Fined

September 13, 2024: FINRA reportedly suspended and fined an Independent Financial Group advisor $5,000 for allegedly failing to supervise. According to FINRA, between July 2020 and December 2022, the VP of Supervision allegedly failed to reasonably respond to red flags, which were escalated to him by members of his team, of an IFG registered representative who was excessively trading five customer accounts.

According to FINRA, the VP reportedly supervised IFG lower-level supervisors who reviewed certain trade alerts and blotters including a “high-principal solicited trade” alert. Between July 2020 and December 2022, numerous trades placed by the registered representative in all five customer’s accounts repeatedly appeared on that alert.

Collectively, these five customers paid more than $2.2 million in total trading costs and incurred realized losses totaling approximately $2.2 million. In one example, a customer was  a 77-year-old retiree with a capital preservation investment objective and a moderate risk tolerance. The registered rep’s trading purportedly  produced annualized cost-to-equity ratio of 20.3%. This customer paid more than $490,000 in total trading costs and incurred realized losses of more than $550,000, inclusive of commissions.

Independent Financial Group to Pay $1 Million for Unsuitable Investments

December 2023: According to an article in the DI Wire, A FINRA panel reportedly directed Independent Financial Group and a former registered representative to pay a combined sum of $1 million to an elderly couple and their related entities due to inappropriate investments in private securities.

The couple reportedly filed a claim against Independent Financial Group and ex-broker Armando Roman, alleging misconduct in recommending direct placement program investments. Their accusations included fraud, elder abuse, breach of contract, fiduciary duty breaches, and failure to comply with securities laws and FINRA regulations. The claimants reportedly represented themselves individually and for several related entities.

The programs included the following investments, Strategic Storage Trust Inc.; Griffin-American Healthcare REIT III Inc.; FS KKR Capital Corporation III; American Realty Capital Trust V Inc.; American Realty Capital Healthcare II Inc.; Walton US Land Fund 3 LP; NorthStar Healthcare Income; CION Investment Corp; and Griffin Capital Essential Asset REIT II.

A FINRA arbitration panel found Independent Financial Group and Roman jointly liable and ordered them to pay $1 million in compensatory damages. This amount included $400,000 to an IRA, $100,000 to The Good Daughter LLC, and $500,000 to Faraway Assets LLC. The panel rejected Roman’s request to remove the case from his record.

Failure to Supervise Unsuitable Recommendations

April 8, 2021: According to a Letter of Acceptance Waiver and Consent, FINRA censured and fined Independent Financial Group $200,000 for supervisory issues.

From January 2008 through March 2016, the firm reportedly failed to reasonably supervise one of it’s former registered representatives who made  unsuitable recommendations to customers. The representative reportedly recommended that his customers concentrate their retirement assets and liquid net worth in speculative and illiquid securities. Apparently the firm became aware of red flags indicating that the representative was making unsuitable recommendations to his customers yet the firm failed to take reasonable actions to investigate and stop the misconduct. 

Broker Misconduct and Customer Complaints

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

IFG Rep Allegedly Churned Customer Accounts

October 2023: An Independent Financial Group registered representative based in Santa Maria, CA, was suspended by FINRA for 18 months and fined for allegedly churning and excessively traded customer accounts. The complaint alleges that none of the customers was an aggressive investor, one of the customers was in her late 80s and suffering from a cognitive disability; a second retired customer was in her late 70s; and a third retired customer was between 69 and 71 years old.

The rep purportedly engaged in frequent in-and-out trades in the customer accounts, while charging high commissions on both buys and sells. This trading reportedly caused the customers to incur realized losses of more than $2.22 million, while allegedly generating more than $2.24 million in commissions for the rep and Independent Financial Group. In addition to the suspension, the representative was reportedly required to pay a fine of $50,000 and restitution of $115,000.

Independent Financial Group Advisor has 14 Complaints

On March 13, 2020, FINRA reportedly revoked the registration of former Independent Financial Group advisor James M. Lamont after he allegedly failed to failed to pay fines and/or costs of $99,437.64 in FINRA Case #2017052705801. FINRA  reportedly suspended Lamont from working in the securities industry for 18 months and fined him $10,000.

FINRA alleges that between September 2015 and November 2017, Lamont purportedly engaged in unapproved private securities transactions involving the sale of promissory notes relating to Woodbridge Group of Companies, a purported real estate investment fund.

He reportedly has 27 disclosure events on his broker check record, including 3 regulatory events, 10 judgement/liens, 1 employment separation and 13 customer complaints. Allegations include misrepresentation and unsuitable investments, among others.

Lawsuits filed against Independent Financial Group Allege Misrepresentation

March 2019 – A civil lawsuit was filed involving Independent Financial Group and its registered representative, Shawn Davis (CRD#: 2911230) in the Superior Court of the State of California requesting unspecified damages founded on allegations that false or misleading statements had been made concerning a business development company, real estate security, equipment leasing products and direct investments.  The claims further alleges that alternative investment transactions recommended by Shawn Davis were inappropriate and that Independent Financial Group and Davis’ former securities broker dealer employers Berthel Fisher and WFG Investments failed to supervise the transactions effected in the customer’s account.  The case is Civil Case No. S-CV-0042532.

David was registered with Independent Financial Group in Auburn, CA from 2014 until 2017. He reportedly had 12 customer complaints filed against him for allegations of unsuitable investments and misrepresentation, among others. 

October 2018 – Former Independent Financial Group advisor Jon Pariser was barred after failing to provide FINRA with requested documents and information related to allegations that he referred some of his customers to an individual who was not registered and who may have recommended or sold potentially unsuitable securities to them.

Pariser was reportedly registered with Independent Financial Group  in Pacific Grove, CA from 2014 until 2018. He reportedly has ten customer complaints filed against him since 2006, four of which are still pending, according to his broker profile. Allegations include fraudulent, unregistered securities recommendations among others. 

Unsuitable Investments

July 2018 – The Financial Industry Regulatory Authority (FINRA) reportedly barred former Independent Financial Group advisor Kyusun “Kenny” Kim from working in the securities industry after he allegedly made unsuitable recommendations to numerous senior customers that they concentrate their retirement assets and liquid net worth in speculative and illiquid securities.

Kim purportedly falsely inflated the net worth figures of several customers on their new account forms and other documents so that they appeared eligible to purchase certain speculative investments, in violation of FINRA Rules.

According to his FINRA BrokerCheck report, Kim has 23 customer complaints on his record. Allegations include wrongful conduct, breach of fiduciary duty, unsuitable investments, breach of contract and financial abuse, among others.

Breach of Fiduciary Duty

September 2019 – The SEC charged Independent Financial Group with breaches of fiduciary duty  in connection with its mutual fund share class selection practices and the fees it and its associated persons received. Between January 1, 2014 to March 30, 2017 the broker dealer reportedly purchased, recommended, or held for advisory clients mutual fund share classes that charged 12b-1 fees instead of lower-cost share classes of the same funds for which the clients were eligible.

The firm and its associates received 12b-1 fees in connection with these investments and reportedly failed to disclose the conflicts of interest related to its receipt of 12b-1 fees, and/or its selection of mutual fund share classes that pay such fees. The firm and its representatives also reportedly received 12b-1 fees for advising clients to invest in or hold such mutual fund share classes.

The firm was censured and agreed to pay disgorgement and prejudgment interest to affected investors, totaling $1,426,150.64.

Free Consultation with a Securities Attorney

All broker-dealers have a responsibility to adequately supervise its 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. 

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

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