FINRA Orders Cambridge Investment Research to Pay $225,000 in Damages for McHenry Savings Bank
On May 11, 2022, FINRA issued an award that found Cambridge Investment Research, Cambridge Advisers, and Vickie Benedetti liable for $225,000 in compensatory damages to McHenry Savings Bank. McHenry Savings Bank alleged in their complaint that Vickie Benedetti aggressively solicited bank clients using confidential information provided by Cambridge Investment Research and Cambridge Advisers. McHenry Bank further alleged that the respondents had engaged in defamation, misrepresentation, and unfair competition.
Vickie Benedetti of Cambridge Investment Research
Although she is named in the award, as of June 3, 2022, Vickie Benedetti does not have any disclosures on her BrokerCheck record. This case serves as an important reminder that BrokerCheck does not always paint a full picture of a stockbroker’s record.
What Are High-Pressure Sales Tactics?
Stockbrokers who put their own interests (and fees) ahead of their clients may employ sales tactics designed to elicit an immediate response from their customers. For instance, they might stress the need to act quickly to secure shares at a certain price. Certain types of investments come with especially large commissions for stockbrokers, which is often the motivating factor behind high-pressure sales tactics. Investors must remain vigilant and be wary of high-pressure sales tactics.
FINRA warns that investors should always be wary of sales pitches that suggest a free lunch. For instance, phrases like “limited time only” should always make an investor wary.
Suitability and Sales Practices
High-pressure sales tactics often go together with unsuitable investments. FINRA Rule 2111 requires stockbrokers to only recommend investments that suit their investor’s needs. To determine a product’s suitability, the broker must carefully assess their customer’s investor profile. The profile has information on their age, tax situation, and employment status—all of which contribute to an assessment of their risk tolerance.
FINRA has special concerns regarding high-pressure sales tactics and elderly investors. If stockbrokers take advantage of an elderly investor, they are guilty of elder financial abuse, a serious area of concern in securities law.
Cambridge Investment Research: Duty to Supervise
FINRA Rule 3110 states that investors are required to maintain a supervisory system that ensures their registered representatives follow securities laws as well as regulations from FINRA and the SEC. If a firm becomes aware of its representative’s high-pressure sales tactics, they have a duty to correct their sales practices.
Cambridge Investment Research: Allegations of Misconduct
This is not the first time Cambridge Investment Research and Cambridge Advisers have been the subject of an investor dispute. You can find a full record of their fines and regulatory actions in their detailed BrokerCheck, the publicly maintained record of broker misconduct.
- On August 30, 2021, Cambridge Investment Research agreed to pay a monetary fine of $250,000 following allegations that they did not adequately safeguard customer information.
Regulation S-P (also known as “The Safeguard Rule”) requires brokerage firms to adopt policies and procedures reasonably designed to safeguard customer records and information. FINRA alleges that from January 2018 through July 2021, cloud-based email accounts of over 121 Cambridge Independent Contractor Representatives were taken over by third parties, resulting in the exposure of at least 2,177 customers’ information.
- In March 2021, Cambridge Investment Research consented to the findings that they failed to adequately supervise advisers who recommended expensive mutual fund switches. In a regulatory action, the firm consented to a $400,000 fine as well as a $3,134,354.82 restitution payment plus interest.
What Should Investors Do Next?
If you lost money following high-pressure sales tactics, your next call should be to an investment lawyer. Contact Kurta Law today for a free case evaluation: firstname.lastname@example.org or (877) 600-0098.