Cadaret, Grant & Co., Inc. (“Cadaret Grant”) (CRD# 10641) 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 Cadaret Grant, 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 Cadaret Grant, you should strongly consider hiring an investment loss 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 Cadaret, Grant & Co., Inc.?
If you’ve lost money caused by Cadaret Grant and/or its employees’ misconduct then the answer is, YES, you can sue Cadaret Grant 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 Cadaret Grant in FINRA arbitration proceedings, but WIN that arbitration. The easiest way to know if you have a viable case against Cadaret Grant is to call Attorney Pearce at our office at 800-732-2889.
What is Cadaret, Grant & Co., Inc.?
Cadaret Grant (CRD# 10641) was first registered as a broker-dealer in 1982. The company is controlled by AWS 4, Inc. and headquartered in Syracuse, New York. 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 502 Cadaret Grant branch offices with over 932 registered representatives in every state.
Cadaret, Grant & Co., Inc. Has Many Different Regulatory Problems
Cadaret Grant’s growth has not been without consequences. There have been approximately 16 Federal, 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 scores of customer complaints filed against Cadaret Grant 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. Cadaret Grant is a repeat offender: there are over 9 SEC and FINRA reported disciplinary proceedings citing the firm with one form of supervisory lapses or another.
A BRIEF OVERVIEW OF SOME OF THE REGULATORY PROBLEMS CADARET GRANT HAS FACED OVER THE YEARS*
Cadaret Grant has been repeatedly censured, warned, and fined millions 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:
SEC Sanctions Cadaret Grant For Failing To Supervise ETP Sales
The SEC sanctioned Cadaret Grant and two of its supervisors (the “Supervisory Respondents”) for failing to reasonably to supervise Cadaret Grant’s registered representatives with respect to their recommendations that customers buy and hold leveraged and inverse exchange traded funds and exchange traded notes (each individually and together, “non-traditional exchange traded products” or “non-traditional ETPs”).
Specifically, Caderet Grant representatives recommended that customers buy and hold a security called VelocityShares 3X Long Crude Oil ETN (“UWTI”), which is a complex exchange-traded note (“ETN”) that offers exposure to an index comprised of crude oil futures contracts and provides triple leverage. They believed UWTI would increase in value with an increase in crude oil prices, even if held for several months. However, UWTI’s prospectus clearly stated that it offered no direct exposure to the spot price of crude oil and that it was not designed for holding periods longer than one day, but rather that it was suitable for sophisticated investors with very short investment horizons.
It appears the representatives either did not read, or read and dismissed, these warnings without a reasonable investigation and lacked a reasonable basis for their recommendations in violation of Sections 17(a)(2) and 17(a)(3) of the Securities Act. Cadaret Grant’s retail investors lost, on average, more than 90 percent of the amounts they invested in UWTI pursuant to the representatives’ recommendations.
Cadaret Grant clearly had policies that stated that registered representatives generally should not recommend non-traditional ETPs like UWTI for long or intermediate investment periods and that representatives should receive training and complete other requirements before recommending non-traditional ETPs to customers. But the Supervisory Respondents failed to establish and implement a reasonable supervisory system for determining whether representatives had a reasonable basis for recommending that investors buy and hold non-traditional ETPs. The Supervisory Respondents also failed to provide training to representatives concerning non-traditional ETPs so that they could form a reasonable basis for their recommendations. Further, the Supervisory Respondents failed to implement Cadaret Grant’s specific policies and procedures pertaining to representatives’ recommendations to brokerage customers involving non-traditional ETPs and failed to devote adequate resources to supervising representatives.
The SEC also found that Cadaret Grant failed to adopt and implement policies and procedures designed to prevent unsuitable sales of non-traditional ETPs by investment advisory representatives to investment advisory clients in light of their investment objectives and financial condition.
Under the circumstances described above, Supervisory Respondents failed reasonably to supervise registered representatives with respect to their recommendations to brokerage customers pertaining to certain non-traditional ETPs within the meaning of Sections 15(b)(4)(E) and 15(b)(6). Cadaret Grant additionally willfully violated Section 206(4) and Rule 206(4)-7 under the Advisers Act.
As a result, the SEC ordered Cadaret Grant to cease and desist from further violations, censured the company, ordered Cadaret Grant to pay disgorgement and a civil monetary penalty, which totaled more than $1.4 million.
FINRA Sanctions Cadaret Grant For Failing To Supervise Registered Representative Involved In A Ponzi Scheme
FINRA investigated and discovered that a Cadaret Grant representative participated in multiple undisclosed private securities transactions which transactions were part of a Ponzi scheme that its agent orchestrated, which resulted in millions of dollars in including several customers of Cadaret Grant. The Firm failed to take reasonable steps to investigate red flags that its representative was involved in private securities transactions, including, suspicious check deposits, public records which showed a connection between the representative and one of the entities involved in the Ponzi Scheme that was not disclosed as an outside business activity, ignoring letters from attorneys investigating outside direct investments with the representative, and permitting the representative to use outside emails accounts to communicate with his customers.
As a result of the foregoing, FINRA concluded that Cadaret Grant violated NASD Rule 3010, FINRA Rule 3110, and FINRA 2010 and censured and fined the company over $200,000.
SEC Orders Cadaret Grant To Pay Over $3 Million For Failing To Supervise Mutual Fund Sales Abuse
The SEC investigated and found a series of failures by registered investment advisers of Cadaret Grant and concluded Cadaret willfully violated Sections 206(2), 206(4) and 207 of the Advisers Act and Rule 206(4)-7 thereunder, and ordered it to pay over $3 million in disgorgement, civil monetary penalties and interest.
First, the SEC found Cadaret Grant registered representatives invested advisory clients in mutual fund share classes with 12b-1 fees instead of lower-fee share classes of the same funds that were available without 12b-1 fees. In its capacity as a broker-dealer, Cadaret Grant received at least $1.93 million in 12b-1 fees for investing clients in the higher-fee share classes. Cadaret Grant failed to disclose in its Forms ADV or otherwise that it had a conflict of interest concerning mutual fund share classes. The practice of investing clients in mutual fund share classes with 12b-1 fees rather than lower-fee share classes was also inconsistent with Cadaret Grant’s duty to seek best execution for its clients. Although Cadaret Grant represented in its Forms ADV that it would comply with its duty to provide best execution for its clients, Cadaret Grant’s representations were misleading in light of its failure to purchase lower-fee share classes and its failure to conduct any analysis of which share class would be most appropriate for advisory clients.
Next, the SEC discovered that Cadaret Grant received marketing support payments from two mutual fund complexes. The mutual fund complexes paid marketing support fees to Cadaret Grant when Cadaret Grant invested its advisory clients in mutual fund share classes that charged 12b-1 fees but would not pay such fees when Cadaret Grant invested them in lower-fee share classes. In total, Cadaret Grant received at least $235,000 in marketing support payments. Cadaret Grant failed to disclose this conflict of interest related to its advisory clients in its Forms ADV or otherwise. In addition, the SEC found Cadaret Grant failed to adopt any written compliance policies and procedures governing mutual fund share class selection.
Last, during the same period, Cadaret Grant failed to refund prepaid advisory fees to clients who terminated their relationship with Cadaret Grant before Cadaret Grant earned all of the prepaid fees. Cadaret Grant failed to disclose in its Forms ADV or otherwise that it would retain unearned prepaid fees.
FINRA Sanctions Cadaret Grant For Lax Supervision Practices
FINRA investigated and found Cadaret Grant failed to establish a reasonably-designed supervisory system with respect to numerous areas of its business. In large part, the Cadaret Grant ‘s supervisory deficiencies stemmed from its failure to devote sufficient resources to the supervision of the brokerage firm’s personnel. For example, during the relevant period, Cadaret Grant employed just three individuals to review for suitability the securities transactions of more than 676 representatives working from more than 450 branch locations.
FINRA Rule 3110 requires that FINRA member firms establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with securities laws, regulations and pertinent rules.
As a result of these, and other, deficiencies, Cadaret Grant violated Section 17(a) of the Securities Exchange Act of 1934 (“Exchange Act”), and Exchange Act Rule 17a-4, NASD Rule 3010, and FINRA Rules 2330, 3110, 4511 and 2010. Notwithstanding, Cadaret Grant got away with just a censure and $800,000 fine.
FINRA Sanctions Cadaret Grant For Variable Annuity Supervisory Failures
FINRA investigated and found Cadaret Grant failed to establish and maintain a supervisory system reasonably designed to supervise variable annuity surrenders recommended or processed by the brokerage firm’s registered representatives where the surrenders were not part of an exchange or replacement done through the Firm in violation of NASD Rule 3010 and FINRA Rules 3110 and 2010. Cadaret Grant also failed to create and maintain books and records reflecting such variable annuity surrenders in violation of NASD Rule 3110(a) and FINRA Rules 451 1 and 2010. The punishment was another slap on the wrist; a censure and a fine of $75,000 and a restitution order in the amount of $236,242. No wonder why this brokerage firm is a repeat offender.
FINRA Sanctions Cadaret Grant For Not Supervising Discretionary Accounts
FINRA investigated and found that one of Cadaret Grant’s financial advisors recommended an investment strategy to customer whereby obtained discretion to trade the entire account balance consisting of variable annuities and exchange between a money market subaccount and a precious metals mining subaccount, based on various factors monitored by the stockbroker. However, the recommended strategy for the customer, was clearly unsuitable, given his investment objective, risk tolerance, income needs, and age, but the company did nothing to investigate and stop the unsuitable investment strategy. The financial advisors recommendation of this strategy violated NASD Rule 2310, and FINRA Rules 2111, and 2010.
FINRA found that Cadaret Grant’s failure to enforce its written supervisory procedures and adequately addressed the suitability issues was in violation NASD Rule 3010(b) and FINRA Rule 2010 and issued a censure and small fine.
FINRA Sanctions Cadaret Grant For Not Supervising Variable Annuity Transactions For Elderly Customers
FINRA investigated and found that Securities America failed to have a supervisory system, including written FINRA investigated and found one of Cadaret Grant’s then registered representatives recommended unsuitable variable annuity transactions to many elderly customers and violated NASD Rules 2310, 2821(b), and 2110. FINRA further found the brokerage firm failed to adequately supervise its financial advisor by not responding to red flags that the stockbroker was engaging in unsuitable recommendations involving variable annuity riders. Moreover, FINRA found that Cadaret Grant also had inadequate systems and procedures in place to supervise its variable annuity business, thereby violating NASD Rules 3010, 2821(c) and (d), and 2110. Finally, FINRA found the brokerage firm further failed to enforce its rules surrounding the use of personal email accounts to conduct its business, which enabled the scheme and violated NASD Rules 3010,3110 and 2110, FINRA Rule 2010, and Securities Exchange Act Rule 17a-4. This time, Cadaret Grant is not only censured but received a substantial fine of $200,000.
FINRA Sanctions Cadaret Grant For UIT Sales Abuse
FINRA investigated and discovered Cadaret grant also failed to establish an effective supervisory system and written supervisory procedures reasonably designed to ensure that customers received appropriate “breakpoints” and “rollover and exchange” discounts (collectively, ”sales charge discounts”) on eligible Unit Investment Trust (“UIT’) purchases. Based on this failure, Cadaret Grant violated NASD Rules 3010 and 2110. Further, Cadaret failed to apply sales charge discounts to customers’ eligible UIT purchases in violation of NASD Rule 2110. Cadaret Grant also failed to include the required legend on customer UIT confirmations in Violation of NASD Rule 2830 and 2110. As a result, FINRA imposed the following sanctions, a censure and fine of$125,000.
*Above are only some of the regulatory disciplinary actions filed against Cadaret Grant by FINRA. NASSA and other state securities regulator investigations and enforcement actions account for another 8 BrokerCheck disclosures.
Cadaret Grant Customer Complaints
There have been scores of customer complaints filed against Cadaret Grant stockbrokers and investment advisors over the years. We have launched many investigations of current and former Cadaret Grant advisors:
- Michael Brown of Cadaret Grant & Co., Inc.
- Gerald Dewes of Cadaret, Grant & Co.
- Michael Thomey of Cadaret Grant & Co.
- Christopher Naugle formerly with Cadaret Grant
- David Resch Of Cadaret Grant & Co.
- Maryann Pierce of Cadaret Grant & Co.
- Michelle Werth of Cadaret Grant & Co.
- Akhil Kumar of Cadaret, Grant & Co., Inc.
If you have lost money investing with any of these Cadaret Grant advisors or others within this brokerage firm, it’s important that you reach out to an investment loss attorney quickly because the statutes of limitations can bar your claims. Call us at 800-732-2889.
Why Does Cadaret, Grant & Co., Inc. 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 Cadaret, Grant & Co., Inc. 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. Cadaret Grant 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 Cadaret Grant without representation with an attorney about their complaints and have their complaints denied.
Consult With An Attorney Who Recovers Investment Losses Caused By Cadaret Grant Today!
The 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 Cadaret Grant 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.