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SLCG Study Finds Aegis Capital, Newbridge Securities Employ Most Brokers with History of Complaints

A Securities Litigation & Consulting Group (SLCG) study ranked brokerage firms based on broker complaint history, finding that nearly one quarter of all brokers employed by Aegis Capital Corp and Newbridge Securities Corp have a history of at least one resolved customer complaint.

SLCG founder Craig McCann described the findings thusly: "The worst brokerage firms over the past 10 years which are still in business remain the worst firms."

For instance, while only 2.6% of brokers at firms with more than 200 brokers have customer complaints in their histories, SLCG found that the worst firms (Aegis Capital and Newbridge Securities) employ complaint-ridden brokers at nearly 10 times the industry average rate.

The study, Rating Brokerage Firms by Their Complaint Histories Rather Than by Their Brokers' Histories, found that the worst firms—defined by firms whose staffs are comprised of the highest percentage of complaint-tainted brokers—tended to concentrate or over concentrate customer funds in a small segment of specific investments, including illiquid securities such as variable and indexed annuities (VAs), non-traded REITs, oil and gas/energy products, direct participation products (DPPs), and other private placements.

McCann pointed out that FINRA's BrokerCheck service shields a variety of customer complaints from public view, including complaints about high-risk brokers and firms that were expunged at the broker or firm's (or their attorney's) request: "Our current measure still misses cases which have been expunged...panels have wiped these cases off brokers' CRDs and BrokerCheck reports because they found that these firms not the broker were solely responsible, yet they vanish from the public record."

The following table summarizes SLCG's findings, indicating the Top 15 worst firms as ranked by percentage of employed brokers with a history of resolved customer complaints:

Rank

Firm Name

# Brokers

# Resolved Complaint Brokers

% Resolved Complaint Brokers

1

Aegis Capital Corp

437

107

24.49%

2

Newbridge Securities Corp

206

50

24.27%

3

Western International Securities

345

67

19.42%

4

National Securities Corp

654

124

18.96%

5

Summit Brokerage Svcs

788

133

16.88%

6

Financial West Invstment

213

32

15.02%

7

Independent Financial Group

619

91

14.70%

8

Calton & Associates, Inc

309

45

14.56%

9

Centaurus Financial, Inc

611

86

14.08%

10

Wunderlich Securities

328

45

13.72%

11

Kovack Securities Inc

417

55

13.19%

12

Berthel, Fisher & Co

344

45

13.08%

13

Oppenheimer & Co Inc

1934

229

11.84%

14

Wedbush Securities Inc

555

64

11.53%

15

Crown Capital Securities

344

39

11.34%

For instance, Aegis' 24.49% and Newbridge's 24.27% rates means that if a customer were to invest with an Aegis or Newbridge Securities broker chosen at random, there is a nearly one-in-four chance the customer would wind up with a broker who has at least one prior customer complaint in their disciplinary history.

Notable on this list is Oppenheimer & Co, Inc., which led all firms in a March 2016 industry-wide study of financial advisers, as Columbia Law School found that 19.60%—or nearly one in five—financial advisers at Oppenheimer & Co had at least one prior instance of misconduct.

The second table includes SLCG's 15 worst firms ranked by the firms' histories of resolved customer complaints. In contrast to the first table—% of brokers with resolved complaints—this table accounts for the fact that brokers move from firm-to-firm throughout their careers, or otherwise leave their firm for a variety of reasons. Accordingly, SLCG wanted to paint a picture showing a percentage or ratio of complaints generated by specific firms, without regard to the individual brokers that are associated with it.

The end result is the ratio of resolved complaints attributable to a specific firm to the average number of brokers employed at the firm over a 10-year period from 2007-2016:

Rank

Firm Name

Avg # Brokers

Ratio: Resolved Complaints to Avg # of Brokers

Ratio: Total # of Complaint-Associated Brokers to Avg # Brokers Employed by Firm

1

Newbridge Securities Corp

247.9

35.09%

28.24%

2

Berthel, Fisher & Co

393.3

33.05%

14.24%

3

Sigma Financial Corporation

665

26.32%

8.27%

4

Santander Securities LLC

438.1

25.79%

12.55%

5

National Securities Corp

617.7

23.47%

17.16%

6

Independent Financial Group

457.8

22.72%

10.05%

7

Aegis Capital Corp

254.7

21.20%

18.45%

8

UBS Financial Services Inc.

12,384

20.20%

12.83%

9

Geneos Wealth Management

345.7

18.51%

9.55%

10

Questar Capital Corp

751.1

17.84%

9.05%

11

Securities America, Inc.

2,385.9

17.73%

8.38%

12

Maxim Group LLC

266.3

17.27%

13.14%

13

Centaurus Financial, Inc

590

16.27%

10.00%

14

Morgan Stanley & Co., LLC

6,179.4

16.05%

10.81%

15

Comerica Securities, Inc.

303.1

14.85%

7.92%

Like the first table, SLCG's Top 15 Firms with Resolved Complaint Histories also included firms from the March 2016 financial adviser report. UBS Financial Services (#8) had the fourth-highest percentage of misconduct-plagued advisers, while Securities America (#11) ranked sixth on the Columbia Law School report. Meanwhile, First Allied Securities—which barely missed the Top 15 cut-off with a 12.52% event ratio—finished second to Oppenheimer & Co as the firm with the highest percentage of advisers with a history of misconduct.

SLCG also ranked firms by pending customer complaints, calculating a pending complaint ratio as a percentage of complaints to brokers at the firm:

Rank

Firm Name

# Brokers

# Pending Complaints

Pending Complaint Ratio

1

Santander Securities LLC

617

147

23.82%

2

Newbridge Securities Corp

206

21

10.19%

3

Berthel, Fisher & Co

344

33

9.59%

4

UBS Financial Services, Inc

12,237

837

6.84%

5

National Securities Corp

654

42

6.42%

6

Aegis Capital Corp

437

24

5.49%

7

Next Financial Group, Inc

661

30

4.54%

8

Mid Atlantic Capital Corp

212

9

4.25%

9

David Lerner Associates, Inc

216

9

4.17%

10

Geneos Wealth Management

356

13

3.65%

11

Independent Financial Group

619

22

3.55%

12

Western International Securities

345

12

3.45%

13

Summit Brokerage Services

788

21

2.66%

14

Morgan Stanley & Co, LLC

3,477

91

2.62%

15

Centaurus Financial, Inc

611

15

2.45%

In conclusion, McCann noted that firms continue to employ brokers with histories of misconduct and complaints. The study found that re-employment was likely to occur at less prestigious firms and at lower compensation, compared to brokers without any history of customer complaints.

McCann cited "loose hiring practices and law compliance ethics" in contributing to a culture of poor quality hires, going so far as to accuse the firms of "preying on unsophisticated investors" in order to save a dollar or turn a profit.

If you have invested with any brokerage firm whose failure to disclose or willful attempt to hide relevant prior disciplinary actions—including resolved customer complaints— has proven harmful to your financial interests upon investment with a misconduct-laden broker whose history was concealed from you, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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