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Janney Montgomery Scott: Broker Fees and Alleged Misconduct

Janney Montgomery Scott LLC (CRD #463) is a registered broker-dealer and investment advisory firm. It is headquartered in Philadelphia, Pennsylvania. According to their website, the firm has 133 offices across 20 states, and employs over 900 financial advisers. Investors may have also worked with Janney Montgomery Scott under the d.b.a. Parker/Hunter Asset Management.

Can I Sue Janney Montgomery Scott?

Yes, but to recover losses you typically must use a process called FINRA arbitration. Arbitration is slightly different from suing in civil court. Securities attorneys can guide you through the process, from filing a complaint to discovery, mediation, and arbitration. These specialized lawyers can also help you secure a fair award.

Janney Montgomery Scott Regulatory Fines

The firm’s detailed BrokerCheck record reveals 120 disclosures, including fines from state regulators as well as the Financial Industry Regulatory Authority.

Here are three recent disclosures that investors should review if they plan to invest with Janney Montgomery Scott.

1.     Alleged Failure to Supervise

According to an Acceptance, Waiver, & Consent agreement (AWC) with the Investor Protection Unit of the Delaware Department of Justice, on February 26, 2020, an investor alleged that Janney Montgomery Scott failed to supervise one of its representatives. FINRA Rule 3110 requires that brokers supervise their representatives and doublecheck that their recommendations suit their investors’ needs. FINRA alleges that the broker engaged in unsuitable trading activity that resulted in unnecessary commissions charged to three clients.

As part of the terms of the AWC, Janney Montgomery consents to pay a fine and disgorgement of $40,000. The firm also consented to a period of heightened supervision for one year.

2.     Allegedly Unsuitable Energy Investments

Janney Montgomery representatives allegedly recommended unsuitable energy-sector securities. The AWC from October 19, 2022, states that the representatives recommended that the investors purchase additional energy-sector securities even after their accounts were already concentrated in that sector. Overconcentration violates FINRA Rule 2111, which requires brokers to recommend suitable investment strategies. Overconcentration is not usually a suitable investment strategy because it exposes investors to too much risk. If the energy sector suffers, an overconcentrated investment portfolio will suffer unnecessarily heavy losses.

The recommendations allegedly generated alerts, but the firm allegedly failed to take reasonable steps to review the energy investments’ suitability.

Janney Montgomery agreed to pay $100,000 as part of a monetary fine in addition to $144,019 in restitution to the investors.

3.     Alleged Failure to Supervise Leads to Loss for Elderly Client’s Estate

According to a Consent Agreement dated October 21, 2020, Janney Montgomery failed to note numerous red flags related to the activities of one of its brokers. This broker allegedly acted in his own best interest when it came to the management of an elderly client’s estate. Allegedly, the firm paid $108,459.68 to the estate of the client who suffered financial harm.

These alleged failures are also violations of FINRA Rule 3110.

Janney Montgomery consented to pay $100,000 as an administrative fine and $50,000 to reimburse the agency for investigative costs.

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Janney Montgomery Scott Conflicts of Interest

Regulations Best Interest requires brokerage firms to provide their customers with a Customer Relationship Summary (Form CRS), which contains disclosures about the firms’ conflicts of interest.

Here are the conflicts of interest that investors should bear in mind:

  • Janney and its representatives are compensated for securities transactions. This creates an incentive to encourage you to execute more transactions.
  • If you buy a security directly from Janney or sell a security to Janney, the firm will mark the price up or down. The firm therefore has an incentive to encourage you to trade directly with the firm.
  • Certain product sponsors share their revenue with Janney Montgomery. Consider asking about revenue sharing when your broker recommends a financial product.
  • Brokerage accounts that participate in the Janney Sweep program provide additional compensation for the deposits. Janney has a financial incentive to recommend investments that generate uninvested cash that will be deposited into the cash sweep program.

Janney Montgomery Scott Broker Fees

Investors should be aware of the fees they pay when they use Janney Montgomery Scott brokerage services.

If you want to learn more about the fees associated with an advisory account, visit their Form CRS.

  • Brokerage transactions can include up-front commissions.
  • Retirement accounts like IRAs are subject to account-level sweep fees.
  • Mutual funds, ETFs, and variable annuities come with fees that can take away from an investor’s returns.

Form CRS also states: “You will pay fees and costs whether you make or lose money on your investments. Fees and costs will reduce any amount of money you make on your investments over time. Please make sure you understand what fees and costs you are paying.”

Always ask questions if you are not sure what fees you are paying for your securities transactions.

Janney Montgomery Scott Brokers

The following brokers are either registered with Janney Montgomery Scott or have registered with the firm in the past 10 years. If you have lost money with any of the following brokers, speak to a securities lawyer today.