FINRA Fines Janney Over Compliance Failures Related to Two Advisors

Posted on October 31st, 2022 at 11:41 AM
FINRA Fines Janney Over Compliance Failures Related to Two Advisors

From the Desk of Jim Eccleston at Eccleston Law.

The Financial Industry Regulatory Authority (FINRA) has fined Janney Montgomery Scott, a regional financial advisory firm, $245,000 due to compliance failures that permitted two advisors to over-concentrate 11 clients in energy equities.

According to FINRA, Janney’s automated compliance systems produced several alerts between December 2013 and December 2016 regarding potential over-concentration in certain client accounts. However, FINRA alleges that Janney failed to take “reasonable steps” to ensure that the advisors’ recommendations were suitable. The investments generating the red flags included limited partnerships emphasizing exploration or development of natural resources, which came at a “high risk of loss if oil and gas prices declined”, according to FINRA.

In one instance, FINRA alleged that an elderly investor with a $100,000 liquid net worth and moderate risk tolerance purchased 19 energy sector equities even after the account was over-concentrated, which resulted in losses exceeding her $100,000 net worth. While Janney has repaid eight clients, the penalty includes $145,019 in restitution to three clients who have yet to be reimbursed, according to FINRA. FINRA previously barred two advisors for failing to cooperate with its investigation, including Scott Palmer, who received his bar in 2018 after racking up 15 customer claims on his record since 2015.

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, advisors, law, finra

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