Failure to Supervise
FINRA has enacted a series of rules that require brokerage firms to supervise the brokers that work for them. Firms have a duty to ensure that brokers are properly licensed and trained. Periodically, brokers are required to review an investor’s investment and financial circumstances and to review investment strategy. Brokerage firms must ensure this review takes place. Investment firms must also monitor the communications between a broker and the investor. In fact, if a broker engages in fraudulent or unauthorized activities with an investor’s funds, the brokerage firm may be liable for failure to supervise.