The Financial Industry Regulatory Authority (FINRA) has sanctioned three broker-dealers within the Cetera network, imposing a combined $1.1 million fine to resolve allegations of systemic failures in their anti-money laundering (AML) and supervisory programs. Regulators claim that between March 2019 and August 2021, these firms failed to reasonably monitor the sale of hundreds of millions of shares of low-priced securities, potentially leaving investors vulnerable to market manipulation.
If you suffered significant investment losses while working with Roger William Bowlin or a related firm, the alternative investment loss attorneys at Meyer Wilson Werning are reviewing investor claims now. Contact us today for a free and confidential consultation, and you pay nothing unless we recover for you.
What Were the Allegations Against Cetera Investment Services?
The FINRA investigation focused on three specific subsidiaries of Cetera Financial Group: Cetera Advisors LLC, Cetera Wealth Services, and Cetera Investment Services LLC. According to the regulator, the firms’ supervisory systems were not reasonably designed to comply with Section 5 of the Securities Act of 1933, which governs the registration and sale of securities.
Key Supervisory Gaps Identified:
- Electronic Deposit Loophole: While the firms required detailed questionnaires for low-priced securities delivered as physical certificates, they did not consistently apply the same scrutiny to electronic deposits.
- Rapid Liquidations: This gap allowed some customers to sell shares and wire out the proceeds before the firms could complete a full regulatory review of the transactions.
- Inadequate AML Monitoring: The firms allegedly lacked the necessary tools to detect suspicious patterns, such as coordinated activity, concentrated trading, or the rapid movement of funds.
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Red Flags: 800 Million Shares Traded with “Weak Controls”
During the review period, FINRA noted that customers at these firms sold approximately 800 million shares of low-priced securities. One notable example involved a customer at Cetera Wealth Services who deposited 75,000 shares of an over-the-counter (OTC) issuer.
Within just two weeks, that customer sold all the shares for approximately $178,000. On certain days, this single customer’s trades accounted for as much as 88% of the entire daily market volume for that stock. Despite these massive “red flags,” including the customer’s involvement in a promotion campaign, the firm allegedly failed to restrict the activity.
Additional Findings Against Cetera Advisors Regarding Account Reports
Beyond the AML issues, FINRA brought a separate set of findings against Cetera Advisors regarding its handling of “consolidated account reports” between January 2017 and August 2021. These reports combined assets held at the firm with “away” assets, often using valuations that were manually entered by representatives.
FINRA found that:
- Supervisors were not required to verify whether representatives were complying with procedures for manually entered data.
- The firm failed to preserve “tens of thousands” of these reports as required books and records.
- A proprietary financial planning tool allowed representatives to generate and share these unvetted reports directly with customers via a firm-sponsored portal, effectively bypassing supervisory review.
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SEC Sanctions and a $8.6 Million Final Judgment
The recent FINRA action follows a history of regulatory challenges for the Cetera network. In October 2019, the SEC filed a complaint alleging that Cetera Advisors LLC and Cetera Advisor Networks LLC directed clients into higher-cost mutual fund share classes that charged 12b-1 fees, even when lower-cost shares were available.
The SEC alleged that Cetera generated over $10 million in undisclosed compensation through these practices and other markups. On October 13, 2022, a court entered a Final Judgment ordering the firms to pay a total of $8,605,470 in disgorgement, interest, and penalties. A Fair Fund was established in July 2023 to distribute these funds to harmed investors.
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How Meyer Wilson Werning Helps Cetera Investors
The pattern of supervisory failures at Cetera firms demonstrates how inadequate oversight can lead to significant financial harm for individual investors. When firms fail to monitor suspicious activity or allow representatives to provide unvetted account reports, the investor often pays the price.
At Meyer Wilson Werning, we represent individuals in arbitration who have suffered losses due to unsuitable recommendations, such as investing in risky microcap stocks that do not align with your risk tolerance. We also handle claims involving negligent supervision, where firms fail to catch “red flags” or unauthorized trading, and misrepresentation, such as providing inaccurate valuations or account data. If you believe your retirement or investment savings were compromised by these systemic failures, our attorneys are here to guide you. Contact us today for a free and confidential consultation. We will review your account statements and help you explore your options for recovery.
Frequently Asked Questions
Why was Cetera fined $1.1 million by FINRA?
FINRA imposed the fine because three Cetera firms failed to maintain adequate anti-money laundering (AML) and supervisory systems. Specifically, they failed to properly monitor the sale of low-priced securities and lacked a reasonable framework for supervising consolidated account reports provided to clients.
What is a consolidated account report, and why is it risky?
A consolidated account report combines all of an investor’s holdings—including those held at other institutions—into one document. At Cetera Advisors, representatives manually entered valuations for “away” assets. Without supervisory verification, these reports can contain inaccurate or misleading information, potentially causing investors to misunderstand the true value or risk of their portfolio.
Has Cetera admitted to any wrongdoing?
No. The firms agreed to the $1.1 million FINRA sanction and the $8.6 million SEC judgment without admitting or denying the findings. A Cetera spokesperson stated that the issues related to “historical supervisory processes” that have since been remediated.
How can I recover money lost through Cetera Investment Services?
Most disputes with brokerage firms are resolved through arbitration. This is a process where a neutral panel reviews evidence of misconduct—such as unsuitable advice or a failure to supervise—and issues a binding decision. An experienced securities attorney can help you determine if you have a viable claim for recovery.
Recovering Losses Caused by Investment Misconduct.