Failure to Supervise Stockbrokers

Every brokerage firm must supervise every broker licensed by that firm. Even brokers who are “independent contractors,” including those who operate out of their homes must be supervised. A brokerage firm’s failure to adequately supervise its broker may also result in liability for the brokerage firm. Federal securities laws and NASD and Exchange rules require brokerage firms to reasonably supervise their brokers for the purpose of preventing violations of the rules and regulations of the securities industry.

Firms and supervisors often claim they can not be liable for a failure to supervise unless the broker is found liable for wrongful acts. However, it is quite possible for a supervisor or firm to be liable to the client for damages without the broker being liable. For example, if the broker was improperly trained, given false information by the firm, not properly licensed, et cetera, the firm may be liable to the client for damages even if the broker is not.

In order to satisfy its obligations, a brokerage firm must show not only that they had in place supervisory and compliance rules and procedures, but also that they effectively implemented and enforced their compliance rules and procedures so as to diligently supervise the activities of the brokers.

If you believe that your broker was not adequately supervised, and this resulted in losses to your account, contact our lawyers today.