Failure to Supervise
San Antonio Failure to Supervise Lawyers – (210) 298-6666 - (800) 519-2800
When brokerage firms are hired to oversee an individual's portfolio, a financial advisor is assigned the portfolio, and the client's assets are appropriately invested soon after that. After all, clients typically don't seek the assistance of a brokerage firm because of a specific advisor, but because the firm as a whole has a solid reputation for providing its clients with sounds investment advice. However, when brokerage houses display a failure to supervise their advisors, and client investments are not given the proper time, consideration, effort, or agreed upon attention they deserve, then such actions can be deemed negligence.
In many instances, the investment advisor works independently and is associated with a broker dealer. In this instance, the brokerage firm or dealer still has a duty to supervise the investment advisor and is usually assigned a supervisor to oversee the investment advisor's actions. The supervisor is known as an OSJ or Office of Supervisory Jurisdiction. A recurring problem with this setup is that usually the investment advisor is in one state and the brokerage firm is in another state. The brokerage firm must still maintain supervision over the investment advisor.
Ultimately, financial advisors are representatives of the firms in which they work. If an advisor makes a poor decision regarding a client's investments, the firm has made a poor decision as well. When this occurs, it is the responsibility of the firm to correct the situation, and any failure to act can be categorized as failure to supervise.
Failure to supervise can take on a variety of forms, including:
- unauthorized trading that goes against the client's decided upon investment plan; specifically to garner commission rates connected to mutual funds and other securities
- churning, twisting, and mutual fund switching, all of which generate advisor commissions with each transaction, many of which are unauthorized transactions that clients aren't even aware of
- break point selling amongst mutual funds, referring to the practice of purchasing mutual funds at amounts just under specified thresholds, which if the amounts were to hit those thresholds would lower the commission rate received by an advisor
- failure to diversify portfolios in order to protect against sector collapse (e.g. clients who invested everything into the technology sector back in the late 1990s and early 2000s failed to diversify their portfolios, and lost entire investment portfolios when the tech bubble burst)
- placing clients in the wrong investment vehicle such as variable annuities
- placing clients in IRS Section 72(t) early retirement accounts and depleting the client's investment in a short period of time
If failure to supervise has had a detrimental impact on your assets, please don't hesitate to contact the investment fraud attorneys at Cichowski & Gonzalez, P.C. Our Texas failure to supervise attorneys will hold investment firms liable for failing to supervise their advisors, and will fight to ensure that your rights as an investor are restored in the process. For more information and a free initial consultation of your Texas failure to supervise case, call us today at 800-519-2800.