Waddell & Reed (CRD# 866) has faced numerous complaints filed by FINRA, state regulators, and investors who suffered losses due to broker misconduct. If you lost money with Waddell & Reed, you may be entitled to recover your investment losses through a legal process called FINRA arbitration.
Investors can pursue claims against Waddell & Reed for fraud, negligence, unsuitable investment recommendations, and breach of fiduciary duty—even if you signed an arbitration agreement. The Law Offices of Robert Wayne Pearce has investigated Waddell & Reed’s regulatory history and represented investors with claims against this brokerage firm and its financial advisors.
You should not wait to file a claim. Statutes of limitations and FINRA eligibility rules can bar your case if you delay too long. The Law Offices of Robert Wayne Pearce, P.A. offers free consultations to evaluate whether you have a viable claim against Waddell & Reed.
Can I Sue Waddell & Reed?
If you’ve lost money caused by Waddell & Reed and/or its employees’ misconduct then the answer is, YES, you can sue Waddell & Reed 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 extensive personal experience in FINRA arbitration proceedings and knows very well how you can not only sue Waddell & Reed in FINRA arbitration proceedings, but WIN that arbitration.
How to Sue Waddell & Reed for Investment Losses
What Can I Do If I Lost Money at Waddell & Reed?
If you lost money at Waddell & Reed, you can file a claim to recover your losses through FINRA arbitration. This process works like a private court proceeding where neutral arbitrators review your case and can award you damages if they find the brokerage firm or its advisors acted improperly.
Waddell & Reed has a documented history of regulatory problems—including a $50 million SEC order for market timing violations and a $16 million FINRA sanction for variable annuity sales abuse. These supervisory failures often trickle down to individual investor accounts, resulting in unsuitable recommendations, excessive fees, or outright fraud.
The fact that you signed a brokerage agreement containing an arbitration clause does not prevent you from pursuing your claim. FINRA arbitration exists specifically because most investor disputes must go through this forum rather than traditional courts. You have the right to seek compensation for losses caused by broker misconduct, negligent supervision, or unsuitable investment advice.
Who Can Help Me Sue Waddell & Reed?
An experienced securities arbitration attorney can help you sue Waddell & Reed by filing and prosecuting your claim through the FINRA arbitration process. The Law Offices of Robert Wayne Pearce, P.A. has handled cases involving Waddell & Reed’s specific regulatory issues—including failure to supervise, unsuitable variable annuity exchanges, and lax oversight of independent representatives.
A qualified attorney will gather evidence, identify the specific violations that caused your losses, and present your case to the arbitration panel. Free consultations are available to determine whether you have a viable claim worth pursuing.
What is Waddell & Reed?
Waddell & Reed (CRD# 866) was first registered as a broker-dealer in 1938. In April 2021, the company was acquired and now controlled by LPL Financial Holdings, LLC. It remains headquartered in Overland Park, Kansas. 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 Waddell & Reed registered representatives in every state. It is now affiliated with the largest broker-dealer and investment advisory firm with over 18,000 financial advisors located throughout the United States.
Why Does Waddell & Reed Have So Many Bad Reviews and Customer Complaints?
Waddell & Reed has so many bad reviews and customer complaints because it operates as an independent broker-dealer with a franchise-style business model that prioritizes growth over investor protection. The company opens numerous small offices nationwide, generating steady revenue without the expense of full-service branches that have on-site managers and compliance staff.
The brokers at these offices are independent contractors—not employees—which means the firm has less direct control over their daily activities. Supervision comes from remote “Offices of Supervisory Jurisdiction” (OSJs) run by other independent contractors who often manage their own businesses on the side. These supervisors cannot monitor what happens at smaller branches on a day-to-day basis.
As a result, there is often no immediate review of new accounts, trades, customer correspondence, or sales materials. Investors become vulnerable to unsuitable recommendations, forged signatures, and misleading statements because no one is watching. Some offices receive only one compliance audit per year. The North American Securities Administrators Association (NASAA) has documented that these independent broker-dealer operations produce more instances of sales abuse and investor losses than traditional brokerage firms with on-site supervision.
Waddell & Reed Has Many Different Regulatory Problems
Waddell & Reed’s rapid growth has not been without consequences. There have been approximately 28 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 Waddell & Reed 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. Waddell & Reed is a repeat offender: there are over 8 FINRA reported disciplinary proceedings citing the firm with one form of supervisory lapses or another.
A BRIEF OVERVIEW OF SOME OF THE REGULATORY PROBLEMS WADDELL & REED HAS FACED OVER THE YEARS*
Waddell & Reed has been repeatedly censured, warned, and fined over $65 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:
SEC Orders Waddell & Reed To Pay $50 million For Market Timing Violations
The SEC investigated and discovered that Waddell & Reed permitted a number of individuals and entities (the “Market Timers” or “Timers”) to market time certain funds in the Waddell & Reed mutual fund complex (“Waddell & Reed funds”), subject to certain limitations on the number, amount and frequency of trades (“Timing Agreements”). Further, that it collected a total of $3.6 million in asset-based fees from three of these Timers (the “Fee Paying Timers”) pursuant to Timing Agreements with those entities.
Market timing includes (a) frequent buying and selling of shares of the same mutual fund or (b) buying or selling mutual fund shares in order to exploit inefficiencies in mutual fund pricing. Market timing, while not illegal per se, can harm other mutual fund shareholders, because it can dilute the value of their shares if the market timer is exploiting pricing inefficiencies. Market timing can also disrupt the management of the mutual fund’s investment portfolio, and frequent buying and selling of shares by market timers can cause the targeted mutual fund to incur costs it would not incur in the absence of the market timing.
During the relevant period, Waddell & Reed had internal procedures designed to prevent or limit market timing, and the Waddell & Reed funds had prospectus disclosures that fostered the impression that the funds discouraged timing. Nevertheless, Waddell & Reed permitted the Fee Paying Timers to time certain Waddell & Reed funds, and they permitted Timers, including the Fee Paying Timers, to time in the Waddell & Reed Advisors International Growth Fund (the “International Fund”), even though they knew that the Timers were harming that fund by diluting other investors’ returns.
The Timing Agreements benefited Waddell & Reed financially. In addition to asset-based advisory fees that Waddell & Reed Investment Management earned, Waddell & Reed also received asset-based fees from the Fee Paying Timers under the Timing Agreements. Because the timing that the Waddell & Reed permitted in return for those financial benefits potentially could (and at times did) harm the funds, Waddell & Reed Investment Management had a conflict of interest. It failed to disclose adequately the facts underlying that conflict to the board of directors of the mutual funds or the shareholders of the mutual funds, thereby breaching its fiduciary duty to the mutual funds.
The SEC ordered Waddell & Reed to cease-and-desist, censured the brokerage firm, ordered undertakings to correct its practices and procedures, and then ordered it to pay $40 million in disgorgement plus a civil money penalty of $10 million, for a total payment of $50 million.
FINRA Orders Waddell & Reed To Pay $16 million For Variable Annuity Sales Abuse
FINRA investigated Waddell & Reed and found that it failed to take adequate steps to determine whether there were reasonable grounds for customers to enter into variable annuity exchanges, failed to establish sufficient guidance for its sales force to use in determining the suitability of exchanges, failed to establish reasonable supervisory systems and reasonable written procedures regarding NASD’s suitability rule and failed to maintain books and records regarding unexecuted variable annuity exchanges, all in violation of NASD Conduct Rules 2110, 2310, 3010, and 3110, and SEC Rule 17a- 3a(6) for which it was censured, fined $5,000,000, and ordered to make restitution to customers in the amount of $11,000,000 for a total payment of $16 million.
FINRA Sanctions Waddell & Reed For Unregistered Salesperson
FINRA discovered that Waddell & Reed’s Compliance Department had been informed that an employee might be engaged in activities requiring registration. Further, that the Compliance Department directed that an investigation be conducted to determine the scope of the employees activities in the Dallas office. While the investigation included a discussion with a supervisor, no one involved in the investigation spoke with the employee, nor did anyone contact the customer who had sent the correspondence directly to the employee indicating he was engaged in sales activities. After the Compliance Department’s limited investigation, it concluded that the employee was not engaging in activities requiring registration even though he actually contacted customers and discussed investments with them. The customers surrendered their variable annuities, and invested their funds in fixed annuities issued by a company not affiliated with Respondent. Other customers liquidated their Individual Retirement Accounts and invested the proceeds in variable annuities. FINRA censured Waddell & Reed for the poor supervision and fined the firm $20,000.
*Above are only some of the regulatory disciplinary actions filed against Waddell & Reed by FINRA. There are 25 more SEC, FINRA, NASSA and/or state securities regulator investigations and enforcement actions reported on BrokerCheck as regulatory disciplinary proceeding disclosures.
How to File an Official Complaint Against Waddell & Reed or One of Its Brokers With FINRA
If you want to file an official complaint against Waddell & Reed, you can submit a complaint directly to FINRA through their online Investor Complaint Center. This creates a formal record of your complaint and may trigger a regulatory investigation. However, filing a regulatory complaint is different from pursuing a claim to recover your money—a complaint alerts regulators, while an arbitration claim seeks financial compensation.
To file a FINRA complaint, visit FINRA’s website and provide details about the broker or firm, the nature of the misconduct, and any supporting documentation you have. FINRA will review your complaint and determine whether to investigate further.
How The Law Offices of Robert Wayne Pearce, P.A. Can Help You Recover Losses at Waddell & Reed
The Law Offices of Robert Wayne Pearce, P.A. assists investors in navigating both the complaint process and FINRA arbitration claims against Waddell & Reed. With over 45 years of experience handling securities fraud and broker misconduct cases, Attorney Robert Wayne Pearce has recovered more than $175 million for defrauded investors nationwide.
The firm handles every aspect of your case—from investigating Waddell & Reed’s specific violations and gathering evidence to presenting your claim before FINRA arbitrators. Attorney Pearce offers free consultations to evaluate your situation and explain your legal options. Contact the firm today to discuss how you can pursue recovery for your investment losses.
Did Waddell & Reed Advisor Misconduct Cause You Investment Losses?
When financial advisor misconduct has caused you to lose substantial value in your investment accounts, you have the right to seek reimbursement from the responsible parties. Waddell & Reed 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 Waddell & Reed without representation with an attorney about their complaints and have their complaints denied.
Investment Losses? We Can Help
Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.
or, give us a ring at (800) 732-2889.
Consult With An Attorney Who Recovers Investment Losses Caused By Waddell & Reed Today
The securities attorneys at The Law Offices of Robert Wayne Pearce, P.A., have helped countless investors over the last 45 years recover the losses from their investment accounts that were caused by broker negligence or misconduct. The firm has extensive experience with Waddell & Reed 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.
