Indiana Broker Negligence Attorneys

For over 20 years, the broker negligence attorneys at Malecki Law have brought successful lawsuits and securities arbitrations against some of the largest financial firms for claims ranging from fraud, negligence, investment suitability, and failure to supervise. Every financial firm has a duty to supervise its financial advisors and the accounts they manage, and, when they don’t do an adequate job of it, they can be held liable to investors who have lost money as a result of the misconduct. This is required by the industry laws and rules at every level, and made clear at the state level by the Indiana Secretary of State, Securities Division (the “Division”), which has brought enforcement actions against financial institutions who have demonstrated failed supervision.

At the federal level, brokerage and other financial firms have a similar legal obligation to supervise their employees, systems, and accounts, as stated, for example, in FINRA Supervision Rule 3111, which states:

“Each member shall establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules. Final responsibility for proper supervision shall rest with the member.”

FINRA Rule 3111(a).

One such FINRA-regulated financial institution, which has been hit by numerous regulators for its repeated supervisory failures, is LPL Financial. In one instance, Indiana’s Securities Division was conducting an investigation following the criminal conviction of one LPL’s former agents, Alfred Talens, for securities-related offenses carried out in violation of LPL’s policies and procedures. According to the Division’s settlement agreement settlement with LPL, in which LPL paid a fine but admitted no wrongdoing, the Division was reviewing emails from Mr. Talens’ LPL account, revealing evidence of Mr. Talens’ crimes. The emails were not reviewed by Mr. Talens’ supervisor despite the email having been flagged for review by the firm’s email monitoring software, which most firms are required to have in place.

Further review of LPL’s practices showed that other sampled emails sent or received by Indiana LPL agents revealed that certain emails captured by the software were removed from the review queue despite being flagged for review and never having been looked at by a supervisor. It was later discovered by the Division that the removal of these emails was occurring due to LPL’s own errant disabling of the software function. LPL ended up reimbursing the customer who lost money as a result of Talens’ actions, but relying solely on an enforcement investigation to make an investor whole is not usually the best strategy. Regulatory investigations are long and drawn out, and often do not compensate victims for their entire loss. For this reason, it is always a good idea to consider hiring an broker negligence law firm, such as Malecki Law, to bring a parallel civil action against the firm for failed supervision.

In many instances where failed supervision is alleged, the finder of fact (i.e., judge or arbitrator) will review the alleged conduct (or lack thereof) for its reasonableness; this is a judgment call for any finder of fact, but one of the clearest ways to show whether a firm violated industry standards is if it has shown that it is unable to follow its own policy manuals. Our law firm’s experienced, broker negligence lawyers know how to litigate against these firms and know which exception reports and documents to seek in discovery that would most clearly evidence failed supervision. While sometimes, as part of an investigation against a financial firm, the regulator will set up a victim fund for the affected customers, the parallel civil action can help make up the difference when the victim fund fails short of making the customer financially whole. The other advantage of a civil action is that there is the additional possibility of being awarded attorneys’ fees and punitive damages if they are warranted.

If you are an Indiana resident who suffered account losses and believe it was due to failed supervision, you should contact the broker negligence attorneys at Malecki Law for a free initial consultation. Our attorneys always ensure that investors are properly represented in accordance with state rules. We have recovered tens of millions of dollars for investors who have lost money in the financial markets, having litigated numerous lawsuits alleging failure to supervise in federal and state court, as well as in FINRA Arbitration, the forum where most retail investors are required to resolve their disputes. We know how to navigate these forums and what documents to seek from a financial firm to prove that an account was not properly supervised. Our recovery results speaks for itself.