At IAA Financial, 84% of Brokers Came from Expelled Firms, 54% with Previous Disclosure Records

Attorney Advising Disclaimer

According to FINRA records, 31 of the 37 FINRA-registered brokers at investment firm IAA Financial previously were associated with troubled firms shut down or banished from the securities industry by regulators, including firms faced with allegations of fraud such as John Thomas Financial, Inc. and EKN Financial Services, as well as firms like GunnAllen Financial Inc., which FINRA shuttered in 2010 for failing to meet capital requirements.

John Thomas Financial, for instance, met its end thanks to accusations of penny stock fraud with alleged damages exceeding $45 million.

54% of IAA Financial's brokers (20-of-37) had at least one disclosure event on their public FINRA BrokerCheck record. The industry average for a FINRA-registered firm is around 12%, which means IAA's broker disclosure rate is four-and-a-half times higher than for the average FINRA member firm.

The 20 brokers with previous disclosure or customer complaint activity averaged four disclosures each.

While FINRA acknowledged "potential risks posed by brokers who formerly worked at one or more firms" kicked out of the industry, the regulator stopped short of shining its spotlight on IAA Financial. Nonetheless, FINRA spokesperson Nancy Condon admitted: "FINRA keeps close tabs on this small but potentially high-risk group of registered persons — and the firms that hire them."

IAA Financial, for its part, defended its hiring practices through its general counsel, Kevin Carreno, who asked, "If these people shouldn't be working in the industry, don't you think Finra has the authority to take that action right now?"

Carreno also downplayed the significance of disclosures and certain complaints, stating that "in some cases, there's just no basis."

On the other hand, IAA Financial's chief executive, David Weinberger, previously was associated with four firms ultimately expelled by FINRA while another IAA Financial broker, Salvatore Clark, was associated with six expelled firms, compiling a total of 16 disclosure events during his time in the securities industry, including alleged violations of the Texas Securities Act, unauthorized trading in customer accounts, breach of fiduciary duty, fraud, negligent misrepresentation, negligent supervision, unauthorized purchases and failure to comply with terms of an arbitration award or settlement.

In October 2013, a Wall Street Journal study found that brokers who left at least two expelled firms had more than eight times as many arbitration claims against them than industry average with 58% of the 5,000 sampled brokers who left at least one expelled firm had at least one disclosure on file.

If you have invested with IAA Financial or with any brokers whose misconduct, including misrepresentations, omissions of material facts or unauthorized transaction activities in your accounts have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.

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