Is Your Financial Advisor Working for a National or Independent Brokerage Firm?

There are two options when an individual investor wants to open an non-discretionary brokerage investment account—a National Brokerage Firm (e.g., UBS Financial Services, Wells Fargo,Merrill Lynch) or Independent Brokerage Firm (e.g., J.P. Turner & Company, Chelsea Financial Services, Kovack Securities). Where you open the account may dictate what types of investments you are offered.

Agents of a National Broker Firm typically recommend the firm’s proprietary products and/or conventional investments that are typically traded on the open markets or tied to publicly-traded companies. These agents typically work under the business model established by the Firm and must meet certain production levels dictated by the Firm. The typical cases seen recently against the National Broker Firms deal with the failing of proprietary products and the sale of oil and gas Investments.

Independent Brokerage Firms utilize “independent contractors” that permit their agents determine what business model to operate under and are able to sell a variety of investments as well as insurance products. The typical cases seen recently against the Independent Brokerage Firms involve the sale of private placements, alternative investments, annuities and REITs.

The distinction between the two kinds of brokerage firms is important, as what investment your broker recommends to a customer is influenced by what kind of firm employs him or her. While risk is relative depending on the investment, independent brokerage firms may recommend inherently higher-risk securities to their customers with limited due diligence.

Many times, their investment advisory side of their business is the only stream of income, unlike a UBS or Wells Fargo that has consumer and commercial banking arm and other income sources. Though there are exceptions, when a national brokerage firm’s investments tank and customers lose money due to unsuitable recommendations, overconcentration, or some other broker misconduct, the firm has a deep enough pocket to make whole an aggrieved investor.

J.P. Turner is an example. J.P. Turner is the subject of multiple securities arbitration claims for allegedly peddling various alternative investments, private placements, and other boom-or-bust investment products.

Our firm has had numerous clients alleging securities violations by J.P. Turner and its brokers. J.P. Turner was eventually closed, once it was acquired by Cetera Advisor Networks LLC (CRD# 13572) and added to Cetera’s numerous independent broker-dealers. Aggrieved investors may have an avenue to recover by going through Cetera.

Some investors are not so lucky, though. Take Newport Coast Securities, Inc. (CRD# 16944), a firm which was also allegedly peddling risky investment products, whose license was cancelled by FINRA. Many investors have been left to wallow in losses due to the firm’s negligence in many cases. The list of independent broker-dealers that have gone under in such situations includes John Thomas Financial (CRD# 40982) and Merrimac Corporate Securities, Inc. (CRD# 35463) among many others.

If you feel uneasy about an investment opportunity or have become a victim of an investment scheme involving anational brokerage firm or an independent broker-dealer, contact the securities lawyers at Silver Law Group, a national Securities Arbitration and Investment Fraud Law firm. Our lawyers represent investors nationwide to help recover investment losses due to securities and investment fraud or stockbroker misconduct. The securities lawyers at Silver Law Group work hard to protect your money from the bad guys. Contact us at (800)-975-4345 .