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Failure to Supervise

Skilled Counsel in FINRA Failure to Supervise Cases

Each brokerage firm must “design and implement written procedures” in order to properly and effectively supervise the activities of each of its brokers and other employees. When a broker engages in negligence or wrongdoing that causes damages to a client the supervisor is also subject to liability for allowing the act(s) to occur.

Every brokerage firm must supervise every broker licensed by that firm. Even brokers who are “independent contractors”, including those who operate out of their homes must be supervised.

Every broker must complete training and pass an exam administered by the National Association of Securities Dealers (NASD) and, as well, pass a multi-state exam to sell securities in the state(s) where his clients are located. In addition to these licenses, supervisors of brokers must train to pass an even more difficult examination in to be licensed by the NASD as a supervisor.

Firms and supervisors often claim they can not be liable for a failure to supervise unless the broker is found liable for wrongful acts. However, it is quite possible for a supervisor or firm to be liable to the client for damages without the broker being liable. For example, if the broker was improperly trained, given false information by the firm, not properly licensed, et cetera, the firm may be liable to the client for damages even if the broker is not.

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