Exploring the Checkered Regulatory History of Cadaret, Grant & Company
For you, it may just be Cadaret, Grant & Co., a well-known broker dealer and investment advisory firm based out of Syracuse, New York. But behind the reputable facade, lurks a history of regulatory actions, arbitrations, and hefty fines.
The Disturbing Tale of the Undisclosed Ponzi Scheme
Imagine this – it’s the summer of 2020 and FINRA, the assertive securities regulator, exposes a scandal involving Cadaret Grant. The firm is found guilty of inadequate supervision of one of their former brokers implicated in a glaring Ponzi scheme. The ice-cold reality of a whopping $200,000 fine leaves the firm’s reputation shaken, to say the least.
Notably, this incident occurred between April 2014 and March 2017, where Cadaret Grant glaringly failed to reasonably supervise the implicated broker, allowing the festering Ponzi scheme to grow. Surprisingly, this wasn’t the first misstep. Indeed, it marked the second time since 2012 that Cadaret Grant had been held accountable by FINRA for failure to supervise alleged sales practice violations.
Casting Light on More Supervisory Woopsies
You’d think one scandal would be enough, right? Think again. The firm received censure and a hefty fine of $800,000 from FINRA again in September 2018. This time, the accusation was surrounding multiple supervisory issues. The firm was accused of failing to establish a reasonably designed supervisory system. Clearly, the firm’s resource allocation was questionable with a meager three individuals overseeing the transactions of over 676 representatives across 450 branch locations! Unbelievable, isn’t it? And mind you, this wasn’t their first encounter with the law either.
Hitting Investors Where It Hurts: The Wallet
Consider this, it’s June 2017 and the Securities and Exchange Commission (SEC) is on the firm’s case. The SEC found that Cadaret, Grant & Co. had subtly violated federal securities laws by keeping investors in the dark. The firm failed to disclose its conflict of interest regarding the selection of mutual fund share classes and its practice of retaining prepaid advisory fees from clients terminating their relationships prematurely. The fallout? They coughed up $3,048,000 with the intention of distributing the collected amount to the affected parties.
A Step Too Far: Targeting the Elderly
Just when you thought it couldn’t get any worse, back in 2012, there was an episode of improper sales practices involving elderly clients. The firm was penalized with a $200,000 fine by FINRA and ordered to pay restitution to investors for questionable sales of variable annuities to elderly clients.
The Unfortunate Case of Broker Misconduct
These are just the company-wide issues. There have also been several cases of registered representatives employed by Cadaret, Grant & Co. allegedly involved in broker misconduct and fraudulent activities. One poignant example is the case of former financial advisor Steven Pagartanis, who was sentenced in January 2020 to spend 170 months in prison. He was supposedly involved in a $9 million fraud scheme targeting elderly single women.
In the end, broker-dealers and investment advisory firms like Cadaret, Grant & Co. have a considerable responsibility to their investors. They must ensure that they have adequate procedures to monitor their employees and safeguard client funds effectively. Otherwise, more investors will continue to suffer the brunt of these regulatory offenses and investor faith in the securities industry will dwindle, a loss that not even the largest of fines can compensate for.