A Florida-based wealth management firm is once again in the headlines over its hiring of brokers with “checkered” pasts. According to a recent Business Insider article, International Assets Advisory (IAA), which oversees approximately $2.5B in customer funds, “proudly hires” brokers that other investment firms wouldn’t even consider, including some with previous offenses on their record.
According to IAA president Ed Cofranceso, the firm’s hiring strategy lets him access a bigger talent pool while allowing some of those whom he employs to get a “second chance.” Cofranceso called his approach “American” and “Christian” and noted the adage about how every story has two sides. For example, the Business Insider article notes, one of the brokers that IAA hired had been fined and fired because his previous firm made him sell “bad products” to investors.
One headhunter interviewed for the news article notes that while the majority of employers will instantly nix any prospective applicants who respond “yes” to even one of nearly six dozen questions on the Financial Industry Regulatory Authority’s (FINRA) U4 registration form, IAA won’t disqualify these individuals right off the bat. Questions asked include whether applicants have been charged for misdemeanors or felonies and if they’ve ever had any “run-ins” with regulators. According to IAA General Counsel Myra Nicholson, candidates with such disclosures whom IAA eventually hires usually have to go through an “on-the-job” audit and may also be subject to more monitoring and certain restrictions.
In 2014, InvestmentNews wrote an article highlighting IAA’s hiring practices, including its willingness to give brokers a second chance. The article noted that:
- Out of 37 of the firm’s FINRA-registered brokers, 31 had previously worked with brokerage firms that regulators had expelled, including EKN Financial Services and John Thomas Financial Inc.
- Of IAA’s 45 brokers at the time, eight of them could not be found in FINRAs records.
- More than half of these FINRA-registered brokers listed at least one disclosure event on their BrokerCheck records, including customer complaints alleging damages of over $5K, as well as past arrests.
The strategy that IAA employs is one that comes with risks.
According to a 2016 study by University of Minnesota and University of Chicago researchers, financial advisers that are past offenders are “five times” as likely to commit misconduct compared to other advisors. When this happens and further broker misconduct is involved, it is often the investors that suffer—investors that may not have sustained these losses if only the broker had been prevented from working with customers again.
Broker Fraud Lawyers
At Shepherd Smith Edwards (SSEK Law Firm), our broker misconduct lawyers represent investors that have sustained financial harm due to negligence, misconduct, or other wrongdoing by brokers and other financial representatives.
Oftentimes, there may be grounds to pursue an investor fraud claim not only against the negligent broker, but also against the brokerage firm that hired the financial representative and failed to inadequately vet or supervise that individual. Contact SSEK Law Firm today to ask for your free case consultation with one of our experienced brokerage firm misconduct attorneys.