Principal Securities Inc. (“Principal Securities”) (CRD# 1137) 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 Principal Securities, 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 Principal Securities, 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 Principal Securities?
If you’ve lost money caused by Principal Securities and/or its employees’ misconduct then the answer is, YES, you can sue Principal Securities 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 Principal Securities in FINRA arbitration proceedings, but WIN that arbitration. The easiest way to know if you have a viable case against Principal Securities is to call Attorney Pearce at our office at 800-732-2889.
What is Principal Securities Inc.?
Principal Securities (CRD# 1137) has been registered with the SEC and FINRA as a broker-dealer since 1968 and with the SEC as an investment adviser since 1997. The company is controlled by Principal Financial Services, Inc. and affiliated with Principal National Life Insurance Company. Principal Securities is headquartered in Des Moines, Iowa with branch offices throughout the United States with financial advisors duly registered as securities and insurance salespersons. 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 900 Principal Securities branch offices with over 4000 registered representatives in every state. It is now one of the 50 largest independent broker-dealer and investment advisory firms in the United States.
Principal Securities Inc. Has Many Different Regulatory Problems
Principal Securities’ growth has not been without consequences. There have been approximately 8 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 hundreds of customer complaints filed against Principal Securities 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. Principal Securities is a repeat offender: there are at least 6 FINRA reported disciplinary proceedings citing the firm with one form of supervisory lapses or another.
A BRIEF OVERVIEW OF SOME OF THE REGULATORY PROBLEMS PRINCIPAL SECURITIES HAS FACED OVER THE YEARS*
Principal Securities 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 SEC and FINRA sanctions for its supervisory failures are below:
SEC Orders Principal Securities To Pay Investors Over $1.7 million For Mutual Fund Sales Abuse
The SEC initiated administrative proceedings for breaches of fiduciary duty and inadequate disclosures by registered investment adviser Principal Securities in connection with its mutual fund share class selection practices and the fees it and associated persons received pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“12b-1 fees”). During the relevant period, it discovered that Principal Securities advisors purchased, recommended, or the firm held for advisory clients mutual fund share classes that charged 12b-1 fees instead of lower-cost share classes of the same funds for which the clients were eligible. Principal Securities and its associated persons received 12b-1 fees in connection with these investments. Principal Securities failed to disclose in its Form ADV or otherwise the conflicts of interest related to (a) its receipt of 12b-1 fees, and/or (b) its selection of mutual fund share classes that pay such fees. During the relevant period, Principal Securities and its associated persons received 12b-1 fees for advising clients to invest in or hold such mutual fund share classes.
As a result, the SEC ordered Principal Securities to cease and desist from committing or causing any violations and any future violations of Sections 206(2) and 207 of the Advisers Act, censured the brokerage firm and ordered it to pay disgorgement and prejudgment interest to affected investors, totaling $1,764,624.26.
FINRA Sanctions Principal Securities For Variable Annuity Sales Abuse
FINRA investigated and determined that for at least three years, the Principal Securities system for supervising additions to existing variable annuities was not reasonably designed to ensure that they complied with applicable securities laws and rules, including those governing suitability – a problem that affected more than 4,000 transactions. As a result, FINRA concluded that Principal Securities violated NASD Rule 3010 and FINRA Rules 2010 and 3110, censured the brokerage firm and fined it $250,000.
FINRA Sanctions Principal Securities For Supervisory Lapses
FINRA investigated Principal Securities and determined that it failed to establish, maintain, and enforce a reasonable supervisory system related to the use of consolidated reports provided to customers by its registered representatives. During the relevant period, the Principal Securities provided four consolidated reporting systems for its registered representatives to enter customized values for assets and accounts held away from the Firm into a consolidated report (“manual entries”): Principal Securities however, did not have an adequate supervisory system to review the reports provided to customers. Through this conduct, Principal Securities violated NASD Rule 3010, and FINRA Rules 3110 and 2010.
Additionally, during the same period, FINRA discovered that Principal Securities failed to enforce its written supervisory procedures, which required registered representatives to retain all customer correspondence, as well as records related to business transactions and other broker/dealer activities for customers. As a result of this conduct, FINRA concluded that Principal Securities violated Section 17 of the Securities Exchange Act of 1934 and Rule 1 7a-4 thereunder, NASD Rule 3010, and FINRA Rules 3110, 4511, and 2010.
For this widespread misconduct, FINRA only imposed a suspension and $125,000 fine.
FINRA Sanctions Principal Securities For Cheating Customers Out Of Sales Charge Waivers
FINRA investigated Principal Securities to determine whether it disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge (“Eligible Customers”). It found that these Eligible Customers were instead sold 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, Principal Securities, then known as Princor, 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, FINRA concluded that Principal Securities violated NASD Conduct Rule 3010, FINRA Rule 3110, and FINRA Rule 2010, censured and ordered the brokerage firm to conduct the remediation and make restitution to those customers cheated out of sales charge waivers and charged higher expenses by being invested in the wrong share of mutual funds sold to them by Principal Securities financial advisors.
FINRA Sanctioned Principal Securities for Email Monitoring System
During an annual audit conducted by FINRA of Principal Securities, formerly known as Princor, the regulator determined that the brokerage firm failed to timely review approximately 2.7 million incoming email communications for approximately 2,100 email accounts due to a coding error in Princor’s email monitoring system. In addition, Princor failed to adequately monitor and test its technology infrastructure to determine that emails were properly routed to Princor’s email monitoring system. As such, Princor violated NASD Rule 3010 and FINRA Rule 2010 for which it was censured and fined $115,000.
*Above are only some of the regulatory disciplinary actions filed against Principal Securities by FINRA. There are at least three more SEC, FINRA, NASSA and/or other state securities regulator investigations and enforcement actions reported on BrokerCheck regulatory disciplinary proceeding disclosures.
Principal Securities Customer Complaints
There have been scores of customer complaints filed against Principal Securities stockbrokers and investment advisors over the years. We have launched many investigations of current and former Principal Securities advisors:
- Wesley Sorensen of Principal Securities, Inc.
- Richard Diaz of Principal Securities
- Clint Hinderaker of Principal Securities
- Jacob Jewell of Principal Securities
- Thomas Koerner Formerly With Principal Securities
- Jeffrey McNaney of Principal Securities
- Richard Newland of Principal Securities
- Page Pittman of Principal Securities
- Dennis Holland of Principal Securities
- Jeffrey Dvorak of Principal Securities
- James Kar of Principal Securities
- Fred Lemmon formerly with Principal Securities
- Steven Wright of Principal Securities
- Bryan Kang of J.P. Morgan Securities LLC
- Bryan Fiala of Principal Securities, Inc.
- John Krohn formerly with Principal Securities, Inc.
If you have lost money investing with any of these Principal Securities 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 Principal Securities 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 Principal Securities 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. Principal Securities 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 Principal Securities without representation with an attorney about their complaints and have their complaints denied.
Related Read: Can You Sue Your Brokerage Firm?
Consult With An Attorney Who Recovers Investment Losses Caused By Principal Securities Today!
The securities lawyers 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 Principal Securities 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.