FINRA Sanctions 10 After Tracking Broker Migration

FINRA sanctioned ten former investment banking representatives from the same company in an ongoing effort to track groups of brokers who move from an expelled or high-risk firm to other securities firms. As a result of its 2014 onsite exam, FINRA found that the ten representatives engaged in securities fraud by using misleading sales pitches and high-pressure sales tactics in order to sell junk bonds and other securities to customers.

Seven of the ten representatives had joined the firm together after leaving a previous company. FINRA's investigation found that the branch offices of both companies used a business model that involved cold-calling customers to make solicited recommendations for securities. Brokers also "churned" existing customer accounts by recommending frequent trades and making unsuitable recommendations.

FINRA Executive Vice President of Regulatory Operations Susan Axelrod said that FINRA would continue to monitor brokers' migrations carefully and "leverage this data to expedite sales practice examinations and enforcement investigations to rid the industry of individuals who prey on vulnerable investors."