Brokerage Firm Review: Kestra Investment Services, LLC

Kestra Investment Services, LLC (“Kestra Investment”) (CRD# 42046) has many different complaints filed by FINRA (Financial Industry Regulatory Authority), state regulatory organizations, and investors such as yourself. At the Law Offices of Robert Wayne Pearce, we have investigated Kestra Investment, its regulatory and customer complaints, and have also represented investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors.

If you believe you have a claim against Kestra Investment, you should strongly consider hiring an investment fraud lawyer. You should not wait until it’s too late to file a claim. The Law Offices of Robert Wayne Pearce, P.A., offers free consultations. Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Can I Sue Kestra Investment Services, LLC?

If you’ve lost money caused by Kestra Investment and/or its employees’ misconduct then the answer is, YES,  you can sue Kestra Investment but the odds are you signed away your right to sue in court and agreed to resolve your dispute in a FINRA arbitration proceeding.  Attorney Robert Wayne Pearce has over 40 years of personal experience in FINRA arbitration proceedings and knows very well how you can not only sue Kestra Investment in FINRA arbitration proceedings, but WIN that arbitration. The easiest way to know if you have a viable case against Kestra Investment is to call Attorney Pearce at our office at 800-732-2889.

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

What is Kestra Investment Services, LLC?

Kestra Investment (CRD# 42046) was formed as NFP Securities, Inc. and registered as a broker-dealer with the SEC and FINRA in 1997.  Since then there have been several name changes and restructuring of the company.  Kestra Investment is controlled by Kestra Financial, Inc. and headquartered in Austin, Texas with affiliate organizations maintaining large corporate offices in San Diego, California; Dallas, Texas; Clearwater, Florida; Bethesda, Maryland; Concorde, Ohio; and Minneapolis, Minnesota.  Its independent broker-dealer Business Model has grown through acquisition and organic development of primarily one and two person registered representative offices supervised remotely. Today there are over 700 Kestra Investment branch offices with over 2000 registered representatives in every state.  It is now one of the top 50 largest broker-dealer and investment advisory firms in the United States.

Kestra Investment Services, LLC Has Many Different Regulatory Problems 

Kestra Investment’s rapid growth has not been without consequences. There have been approximately state  and self-regulatory body disclosure events; that is, final and formal proceedings initiated by a regulatory authority (e.g., a state or federal securities agency like the U.S. Securities and Exchange Commission (SEC) or self-regulatory body like the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) ) for a violation(s) of investment-related rules or regulations. In addition, there have been hundreds of customer complaints filed against Kestra Investment for misconduct by its securities sales and investment advisory representatives that are not reported by the firm on its Central Depository Record. 

We have reported and written about these regulatory problems and customer complaints over many years. Kestra Investment is a repeat offender: there are over 10 FINRA reported disciplinary proceedings citing the firm with one form of supervisory lapses or another in the last decade.

A BRIEF OVERVIEW OF SOME OF THE REGULATORY PROBLEMS KESTRA INVESTMENT SERVICES, LLC HAS FACED OVER THE YEARS*

Kestra Investment has been repeatedly censured, warned, and fined over $1 million for its own misconduct and failure to supervise its army of financial advisors.* A few of the notable FINRA Sanctions for its Supervisory Failures are below:

Kestra Investment Sanctioned By FINRA For Taking Nonpublic Personal Customer Information

From approximately November 2017 until February 2019 (the “Relevant Period”), Kestra Investment caused certain recruited registered representatives to take nonpublic personal customer information from the firms where the representatives were then registered and to disclose it to a third-party vendor that assisted the representatives with their transition to Kestra Investment, without the other broker-dealers’ or the customers’ knowledge or consent, causing those broker-dealers to violate the SEC’s Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Information (“Regulation S-P”). As a result, Kestra Investment violated FINRA Rule 2010.  For this misconduct, Kestra Investment was censured and fined $125,000. 

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Kestra Investment Sanctioned By FINRA For Cheating Customers Out of Sales Charge Waivers

FINRA investigated and found that during the relevant period, Kestra Investment disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a frontend sales charge (“Eligible Customers”). Instead of selling these customers Class A shares with no front-end sales charge, Kestra Investment sold these Eligible Customers Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. During this period, Kestra Investment failed to establish and maintain a supervisory system and procedures reasonably designed to ensure that Eligible Customers who purchased mutual fund shares received the benefit of applicable sales charge waivers. As a result, Kestra Investment violated NASD Conduct Rule 3010, F1NRA Rule 3110, and FINRA Rule 2010.  For this misconduct, Kestra Investment was censured and fined $225,000 and ordered to provide remediation to the eligible customers to ensure they received proper restitution related to the sales charge waivers they missed. 

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Kestra Investment Sanctioned By FINRA For Variable Annuities Sales Abuse

FINRA investigated and found during the relevant period that Kestra Investment failed to reasonably supervise its registered representatives’ recommendation of multi-share class variable annuities (“VAs”) to its customers. Kestra Investment also failed to provide training to its registered representatives and principals on the sale and supervision of multi-share class VAs. By engaging in this conduct, Kestra Investment violated NASD Rule 3010(a) and (b), and FINRA Rules 2010 and 2330(d) and (e). Moreover, FINRA found Kestra Investment also failed to establish, maintain, and enforce an adequate supervisory system, including written supervisory procedures, that was reasonably designed to review and monitor consolidated reports sent to customers by registered representatives. By engaging in this conduct, Kestra Investment violated NASD Rule 3010(a) and (b), and FINRA Rule 2010.  For this misconduct, Kestra Investment was censured and fined $475,000. 

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Kestra Investment Sanctioned By FINRA For Supervisory Lapses

During another FINRA investigation, it discovered that Kestra Investment failed to commit the necessary time, attention and resources to several critical regulatory obligations related to its supervision of registered representatives. These supervisory failures included the following:

• Failure to supervise the private securities transactions of 79 representatives who were dually registered with Registered Investment Advisors (RIAs);

• Failure to preserve securities-related emails sent and received by five of its registered representatives;

• Failure to approve and preserve advertising materials contained on three websites that were maintained by one of its registered representatives; and

• Failure to timely update the Forms U4 of its registered representatives on 81 occasions.

By engaging in the foregoing misconduct, FINRA concluded that Kestra Investment then known as NFP Securities, Inc. violated FINRA By-Laws Article V, Section 2, FINRA Rules 1122, 2010 and 4511, NASD Rules 2110, 2210(b), 3010(a), 3040(c)(2), and 3110, and Section 17(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 17a-4 promulgated thereunder.  For that misconduct, FINRA imposed a censure and a fine of $500,000 on the brokerage firm. 

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Kestra Investment Sanctioned By FINRA For Unfair Markups

FINRA Investigated and discovered during the relevant period that Kestra Investment then known as NFP Securities, Inc. (NFP) charged excessive markups on riskless principal corporate bond transactions, in violation of NASD Rules 2440 and 2110. The excessive portion of the firm’s markups totaled over $43,000.  FINRA also found that NFP also failed to implement a supervisory system and procedures that were reasonably designed to ensure that prices charged in principal transactions with customers were fair, reasonable and not excessive, in violation of NASD Rule 3010 and 2110.  FINRA imposed a censure and a fine in the amount of $43,121.39.

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Kestra Investment Sanctioned By FINRA For Misleading Advertising Materials

During another FINRA investigation, the regulator found that Kestra Investment then known as NFP Securities, Inc. (NFP) violated NASD Rules 2210(d) and 2110 by approving certain advertising materials that contained misleading statements and did not provide a sound basis for evaluation and/or a complete presentation; NASD Rules 2210(b) and 2110 for failing to document approval of certain advertising materials and failing to maintain records of certain advertising materials that were approved for use by NFP; and NASD Rules 3010 and 2110 for failing to supervise retail equity-indexed annuity (“EIA”) sales activities.  For that misconduct, NFP consented to a censure and a $50,000 fine. 

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Kestra Investment Predecessor Sanctioned By FINRA For Reporting Violations

During another FINRA investigation, the regulator found that Kestra Investment then known as NFP Securities, Inc. (NFP) failed to timely file Forms U-5. Additionally, NFP failed to file accurate and timely reports pursuant to NASD Conduct Rule 3070 and imposed a censure and $12,000 fine. 

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Why Does Kestra Investment Services, LLC Have So Many Regulatory Problems And Customer Complaints?

Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of these franchise type operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with on-site manager, compliance officer and operation personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and therefore not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors’ rights and interests as their lowest priority.

The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor’s compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these Independent broker-dealers. 

Generally, there is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to sales of securities that have not been reviewed or authorized by anyone other than the sales representative earning a commission. There may be no one onsite to detect forgeries of clients’ signatures on documents, the placement of inaccurate information about a client’s investment objectives and financial condition to document the suitability of a particular investment recommendation. Oftentimes there is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, it is not unusual for there to be only one compliance audit visit per year at many of these offices.

These Independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms than the traditional brokerage firms with branch offices with on-site managers and compliance personnel.

Did Kestra Investment Services, LLC Advisor Misconduct Cause You Investment Losses?

When financial advisor misconduct has caused you to lose substantial value to your investment accounts, you have the right to seek reimbursement from the responsible parties. Kestra Investment is responsible like any employer for its financial advisors acts and omissions. In addition, it has an independent duty to supervise its stockbrokers and investment advisors. These cases can be extremely complex, and so having the support of a reputable attorney who is experienced in recovering investment losses for investors is key to your success. Many customers make the mistake of contacting Kestra Investment without representation with an attorney about their complaints and have their complaints denied.

Related Read: Can You Sue Your Brokerage Firm?

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

Consult With An Attorney Who Recovers Investment Losses Caused By Kestra Investment Services, LLC Today!

The securities attorneys at The Law Offices of Robert Wayne Pearce, P.A., have helped countless investors over the last 40 years recover the losses from their investment accounts that were caused by broker negligence or misconduct. The firm has extensive experience with Kestra Investment cases, and Attorney Pearce is committed to seeing that those responsible for the losses you have suffered are held fully accountable.

Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Robert Wayne Pearce

Robert Wayne Pearce of The Law Offices of Robert Wayne Pearce, P.A. has been a trial attorney for more than 40 years and has helped recover over $170 million dollars for his clients. During that time, he developed a well-respected and highly accomplished legal career representing investors and brokers in disputes with one another and the government and industry regulators. To speak with Attorney Pearce, call (800) 732-2889 or Contact Us online for a FREE INITIAL CONSULTATION with Attorney Pearce about your case.

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