Bad brokers don’t leave the business; they just move on to a different firm.
Bloomberg View reports that is one of the key findings of a study of broker misconduct by professors at the business schools of the University of Chicago and University of Minnesota. The study, titled “The Market for Financial Adviser Misconduct,”reviewed broker disciplinary records from 2005 to 2015 stored in the Financial Industry Regulatory Authority’s BrokerCheck database, covering almost 4,000 securities firms employing about 640,000 brokers.
There is an enormous wealth of information that is publicly available about brokers who violate the suitability rules and other standards of conduct. What the study found was that misconduct that resulted in disciplinary action was widespread, with one in 13 brokers having a misconduct-related disclosure in their Finra files.
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