Like birds of a feather, bad brokers flock together, according to Craig McCann, owner of Securities Litigation and Consulting Group (SLCG) Inc.
In an analysis of Finra data he posted on LinkedIn, McCann said his research and another study have found bad brokers concentrate in bad brokerage firms.
In addition, he warned that the concentrations of bad brokers help predict future misconduct by co-workers not yet revealed to be bad.
“Brokers at bad firms are more likely to engage in future investor harm—whether they had previously engaged in investor harm or not—than otherwise identical brokers at good firms,” McCann added.
Using Finra measures of investor harm and misconduct at firms with more than 100 brokers, small brokerages were found to have more bad actors than large firms, SLCG said.
Of the 42 firms with the worst records, 32 had fewer than 400 brokers and only Oppenheimer & Co. had more than 1,000.
Of the 10 worst firms, eight had fewer than 400 brokers.