COMMONWEALTH FINANCIAL NETWORK STOCKBROKER MISCONDUCT

Commonwealth Financial Network is based in Waltham, Massachusetts and San Diego, California  Commonwealth is a growing firm, with about $100 billion in customer assets and over 1,500 financial advisors.   Commonwealth Financial is growing company with many small branch offices.  Supervision in smaller branch offices has been a challenge to the industry generally, and rapid growth can put stress on any firm’s supervision systems.

Commonwealth Financial was fined $250,000 for supervisory issues involving email review and archiving.  Commonwealth’s email review system failed to review more than 12 million emails, and failed to surveil many emails sent by its stockbrokers.  (March, 2014 2012032025201).

Commonwealth Financial was fined $300,000 by a state regulator for permitting its stockbrokers to sell non-traded REITS (Real Estate Investment Trusts) in excess of the Massachusetts heightened 10% concentration limits imposed by the prospectus. (May, 2013 E-2013-0046).

Commonwealth Financial was fined $250,000 and ordered to pay restitution for its failures to supervise a stockbroker who defrauded at least 34 customers.  The stockbroker lied about purchases and sales of securities, misappropriating funds, and sent false statements from the broker’s own investment advisory firm.  Commonwealth Financial failed to establish procedures and systems that would be reasonably expected to prevent and detect such violations; Commonwealth’s supervision of the stockbroker was inadequate. (SEC 3-12749).
Commonwealth Financial was fined $1,400,000 for an unpermitted revenue sharing program with a preferred mutual fund system.  Those mutual funds received preferential treatment from Commonwealth Financial in marketing.  The funds paid additional brokerage commissions to the firm and those commissions violated regulatory rules.  Additionally, Commonwealth Financial failed to retain email for the time required by the books and records rules.  (EAF040770002).

Commonwealth Financial was the subject of an arbitration claim (along with Ameriprise, and stockbroker Fouad Zealter).  The stockbroker recommended that the customer  retire early, take a  roll-over of shares of his employee stock ownership plan into a IRS section 72(t) IRA account and a non-72(t) IRA account.  There was a significant arbitration award from these events.   (13-03014).