Widespread Cheating Scheme Uncovered
FINRA has unveiled an extensive cheating operation involving more than 60 brokers in New York who circumvented mandatory continuing education requirements. Each broker faces a one-month suspension and $5,000 fine for violations occurring since 2021. The scheme centered around a single unidentified individual who completed the required 15-hour continuing education coursework on behalf of these professionals.
The brokers involved in this matter were spread across 15 firms rather than being concentrated at a single brokerage. Several of these firms have subsequently released public statements, emphasizing that FINRA’s investigation did not find them liable for any supervisory failures. In these statements, the firms also announced they are strengthening their supervision protocols while emphasizing their ongoing dedication to maintaining their clients’ trust and confidence.
Investigation Findings & Regulatory Response
Beyond the original sanctions, the investigation’s impact has been far-reaching. FINRA’s investigation resulted in lifetime bans from the financial sector for four brokers who declined to participate in the inquiry. While FINRA officials have confirmed that a single individual completed the continuing education requirements for all the brokers involved, they have not disclosed whether this person received compensation for their actions. The regulatory body has maintained discretion, only confirming information explicitly stated in the letters of acceptance, waiver, and consent (AWC).
Though FINRA officials have not directly named the disciplined brokers, public records in their disciplinary database and monthly reports reveal the scope of these identical violations with documentation of the insurance cheating allegations beginning to appear in March 2024.
Employment Impact
The professional impact of these violations varies significantly across the affected brokers. The majority – 35 brokers – have maintained their employment status without change. However, eleven brokers are no longer registered with their original firms, though their BrokerCheck records don’t specify the reasons for their departure. Five brokers were terminated and haven’t secured new positions in the industry, while one managed to register with a different brokerage firm after being fired. In a particularly noteworthy pattern, three brokers were initially fired but subsequently rehired by their original firms around the time their FINRA suspensions concluded, with their files noting that the “termination [was] required to comply with a regulatory suspension.”
Compliance Team Implications
This case underscores the importance of fostering a culture of compliance where educational requirements are viewed as essential professional development rather than mere regulatory obligations. Compliance departments should consider strengthening their training programs around the significance of continuing education and the severe consequences of attempting to bypass these requirements, including potential career-ending disciplinary actions.
The incident also emphasizes the need for regular audits of continuing education programs and increased scrutiny of completion documentation, particularly when multiple employees complete requirements within similar timeframes. This case could also indicate a trend in FINRA or other state regulators looking more carefully at continuing education records in the future.
