Study: 7% of financial advisors disciplined for misconduct

[Winehole23]

There's a phrase no one wants to read in a sweeping report about the financial advisers who handle their savings: economy-wide misconduct.


A new working paper by business school professors at the University of Chicago and University of Minnesota found that 7 percent of financial advisers have been disciplined for misconduct that ranges from putting clients in unsuitable investments to trading on client accounts without permission. That's a troubling mark for an industry that relies on the trust of clients. And some large, well-regarded firms have misconduct records that far exceed the average. Nearly 20 percent of financial advisers at Oppenheimer & Co., with more than 2,000 advisers counted in the study, have misconduct records, according to the new paper.


"It's everywhere, not just small firms. It is pervasive," said Amit Seru, a finance professor at the University of Chicago's Booth School of Business and a co-author of "The Market for Financial Adviser Misconduct."


Seru considers the study to be conservative in measuring misconduct. The paper homed in on just six of 23 categories of disclosure in the BrokerCheck database considered "indicative of adviser misconduct." The database is overseen by the Financial Industry Regulatory Authority, or FINRA, the industry's self-regulatory organization. The study counted as misconduct disclosures about an "investment-related arbitration or civil suit ... that resulted in an arbitration or civil judgment for the customer," as well as formal proceedings by regulators "for a violation of investment-related rules," among other alleged infractions.

http://www.bloomberg.com/news/articl...ncial-advisers

[DMX7]

And the number of financial advisers who have actually done misconduct is much high I suspect.