The Massachusetts Securities Division recently announced that it is conducting a sweep of state-registered broker-dealers with “an above average number of representatives with current misconduct reports on their record to learn details of the firms’ hiring policies and procedures.”
The regulatory body has reportedly reached out to 241 firms where more than 15% of advisors have at least one current disclosure incident on their record. According to reports, the firms have two weeks to respond to the request information on hiring since Jan. 1, 2014, and must tell regulators the number of representatives terminated or placed on heightened supervision in that period.
A recent study found 7.7% of brokers had a record of misconduct over a 10-year period.
In February, the Financial Industry Regulatory Authority said it was investigating firms’ compliance culture. FINRA CEO Richard Ketchum said in May that from an exam perspective, the regulator counts “culture as a factor that influences a firm’s risk profile” and that there was a “direct line between culture and the probability or severity of an enforcement action.”
This appears to be yet another instance where the State of Massachusetts and its securities regulator are at the forefront of attempting to clean up the brokerage industry. The State is often aggressively pursuing brokerage firms that fail to comply with regulatory rules and standards.
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Last modified: June 6, 2016