Failure to Supervise

FINRA Rule 3010 requires brokerage firms to supervise all activities of their registered employees, meaning that the firms themselves owe a duty to the investors who trust the firm with their investments. When an employee violates the law by engaging in, for example, breach of fiduciary duty, theft, unauthorized trading, selling away, etc., and the firm failed to reasonably supervise the employee in a manner that would have prevented the illegal behavior, the firm is liable to its investors for their losses. Reasonable supervision requires examination and monitoring of broker-dealers and investment advisers and their records to detect and prevent wrongdoing. If a firm has failed to take proper measures to follow up on red-flag practices, or failed to put in place and enforce policies to detect red-flag practices, it can be held to account for losses it should have prevented in securities litigation or FINRA arbitration.

If you think that your investment adviser was not properly supervised by their employer, contact Rosenberger + Kawabata.

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