What duties do supervisors owe investors?

Stockbrokers are supervised by branch managers or branch office managers (BOMs). The BOM has a duty to make sure the brokers they oversee compliance with regulatory rules and internal sales practice rules:

• The BOM must evaluate and screen the broker prior to hiring the broker.
• BOMs may review broker-client communications, order tickets, account opening documents, account holdings, and customer complaints.
• The BOM may also review account activity in the client accounts for which a broker is responsible, including:
  • High-volume orders
  • High-dollar value order
  • Concentrated positions (too much of one stock in a single account)
  • Excessive use of margin
  • Unusual or excessive commissions

When broker negligence or misconduct occurs, the BOM should create a written record of the broker’s conduct. Our lawyers often use this written record to prove a case against the broker or firm.