Customer Complaints Against Cambridge Investment Research
We are interested in speaking to customers who have complaints against Cambridge Investment Research. Our law firm has experience handing customer complaints related to non-traded REITs, business development corporations, variable annuities and investment fraud. If you or someone you know has a complaint against Cambridge Investment Research, please call us at 212-203-9300 for a free and confidential case consultation.
SEC Complaint Alleges Poor Supervision at Cambridge
When financial advisor Richard Sandru joined Cambridge Investment Research in 2009, the firm placed him on heightened supervision. According to the Securities and Exchange Commission, Cambridge’s Department of Advocacy and Supervision had found Sandru had “poor credit, including a home in foreclosure.” The firm was also notified by the Financial Industry Regulatory Authority that it was investigating Sandru’s termination from a previous firm.
Despite his placement on heightened supervision, Sandru allegedly went on to defraud at least 47 clients, forging signatures on financial planning agreements to misappropriate funds from their accounts and “adding costs to agreements without their knowledge,” according to SEC charges in its complaint. He was eventually barred from the securities industry and ordered to pay fines and disgorgement of more than $700,000. Cambridge Investment Research paid a penalty of $225,000 to settle charges that it failed to supervise Sandru, while his direct supervisor paid a fine of $20,000 and was suspended from acting as a supervisor for one year.
That was in 2013. In the years since, regulators have found, Cambridge Investment Research’s supervisory failures continued unabated, with investors suffering substantial losses at the hands of financial advisers who abused their trust.
Complaint: Cambridge Rep Admitted Stealing $1.5 Million from Elderly Clients
Louisiana financial advisor Ralph Savoie was affiliated with Cambridge Investment Research and other firms when he stole more than $1 million from elderly investors in a fraudulent scheme that started in 2013, according to federal charges. After assuring investors he would place their funds in “sure thing” securities and insurance products, for which he promised high returns, he instead spent their funds on personal expenses like jewelry purchases, restaurants, hotels, rent payments, and credit bills. He even used investor funds to pay other investors.
Savoie’s scheme fell apart shortly after one of his victims “confronted” him about his investment, according to prosecutors. During the confrontation, Savoie “admitted to the victim investor that what he did with the victim investor’s money illegal,” but “later told the victim investor that he would never see his money returned if he reported the matter to law enforcement.” In order to conceal his activity from his victims, he hid that he had been barred from acting as a broker by the Financial Industry Regulatory Authority. When he pleaded guilty in November 2018, he admitted the theft of “up to $1.5 million from investors.”
As a 2018 report by the New Orleans Times-Picayune describes, Savoie used his affiliation with Cambridge Investment Research to solicit investments and ease victims’ concerns, lulling them “into believing he was a reputable and trustworthy financial professional who had indeed invested their money as promised.” The firm told the Associated Press that Savoie worked for it as an independent contractor rather than an employee.
Savoie pleaded guilty to wire fraud and was sentenced in November 2018 to 14 years in prison. “This conviction and sentence sends a loud and clear message—those who abuse their fiduciary responsibilities and take advantage of the elderly in this district will face the full might of the federal government,” said US Attorney Brandon J. Fremin in a statement about the sentencing. “We will not tolerate corrupt professionals who abuse positions of trust and exploit vulnerable individuals simply to enrich themselves.”
Complaint: Cambridge Email Hacks
One of the most recent regulatory actions against Cambridge Investment Research came in August 2021, when he Securities and Exchange Commission fined the firm $250,000 over its failures to safeguard customer privacy. According to the SEC’s order, more than 121 Cambridge representatives had their email accounts hacked by “unauthorized third parties” between January 2018 and July 2021, causing the exposure of at least 2,177 customers’ personally identifying information. “Although Cambridge discovered the first email account takeover in January 2018,” the SEC charged, “it failed to adopt and implement firm-wide enhanced security measures for cloud-based email accounts of its representatives until 2021, resulting in the exposure and potential exposure of additional customer and client records and information.”
As an AdvisorHub report noted, the hacks did not appear to result in harm to customers, but nonetheless violated securities regulations and placed customers at risk of harm. An SEC enforcement chief said in a statement, “Investment advisers and broker dealers must fulfill their obligations concerning the protection of customer information. It is not enough to write a policy requiring enhanced security measures if those requirements are not implemented or are only partially implemented, especially in the face of known attacks.”
Complaint: LJM Preservation & Growth Losses
Another 2021 regulatory action, this one taken by the Financial Industry Regulatory Authority, found that Cambridge Investment Research failed to reasonably supervise its representatives’ sale of an alternative mutual fund called the LJM Preservation & Growth Fund. As an AdvisorHub report described, the LJM Preservation & Growth Fund was “keyed to market volatility” and tanked 80% over a two-day period in February 2018 before dissolving in March 2018.
FINRA’s findings stated that Cambridge Investment Research permitted its representatives to sell investments in LJM “without a sufficient understanding of its risks and features, including the fact that the fund pursued a risky strategy that relied, in part, on purchasing uncovered options.” Cambridge representatives allegedly sold at least $18 million in LJM shares to more than 550 clients, many of whom had “conservative and moderately conservative risk tolerances.”
In addition to lacking a system to determine whether mutual funds were complex products that warranted heightened due diligence, FINRA found, Cambridge did not provide its representatives with adequate training about the risks of alternative mutual funds, and did not impose any limitations on its sale. As such, Cambridge customers who held shares as of February 6, 2018 suffered the losses of about 80% of their investments. While the firm did not admit or deny FINRA’s findings, it consented to a $400,000 fine and to pay more than $3.1 million in restitution to affected customers.
Complaint: Cambridge’s Supervisory Failures Enabled Unsuitable Mutual Fund, UIT Trades
In a similar 2020 sanction, FINRA fined Cambridge Investment Research $150,000 over complaints that it failed to supervise unsuitable short-term trading of unit investment trusts and mutual fund A-shares. A Letter of Acceptance, Waiver and Consent released by the regulator also found that Cambridge failed to identify excess commissions on several dozen transactions in 2013 and 2014, causing customers to be overcharged by more than $17,000.
With respect to the unsuitable short term trades or switches of mutual fund Class A shares and UITs—products typically designed as long-term investments that can incur substantial fees when redeemed early—FINRA found that Cambridge did not provide its supervisory principals with adequate guidance to follow up on alerts generated by its automated trade surveillance system. As a result, the firm’s generation of 11,910 alerts of possible unsuitable transactions between July 2013 and December 2014 did not result in the rejection of a single trade. “The lack of sufficient guidance to Firm principals,” FINRA found, “allowed at least one of the Firm’s representatives to engage in unsuitable short-term trading in mutual fund Class A shares.” Cambridge neither admitted nor denied FINRA’s findings.