CrimProf Blog

Editor: Kevin Cole
Univ. of San Diego School of Law

Monday, December 4, 2017

Law & Mills on Financial Advisors with Criminal Records

Kelvin Law and Lillian F. Mills (Nanyang Technological University (NTU) and University of Texas at Austin - McCombs School of Business) have posted Do Financial Gatekeepers Under-Protect Investors? Evidence from Criminal Background Checks on SSRN. Here is the abstract:
2.6% of financial advisors have criminal records, half of which are for felonies. This paper examines whether the hiring of financial advisors with pre-existing criminal records poses higher risks for investors than hiring those without. Financial advisors with pre-advisor criminal records are more likely to receive future customer complaints. Their complaints are more likely to receive arbitration awards or settlements and are more likely to involve large settlements exceeding $100,000. Our results flag financial advisors with pre-existing criminal records as high-risk individuals, especially when the crimes were recent, and even when the advisors were not convicted. Regulators appear to underestimate the risk of these advisors. Investors also should demand greater protection when dealing with their advisory firms, even if their own advisors have no criminal records, as firms that hire advisors with criminal records are more likely to have their licenses canceled or be expelled from the securities industry.

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Great Article!!! Thanks for sharing the article with readers.

Posted by: James Parker | Dec 5, 2017 3:52:26 AM

Hmm, the article isn't all that great, when you consider that the authors' failed to include in their results a very key fact.
CHR's do not contain notations regarding false arrests & subsequent wrongful convictions obtained via: the plea bargain.
Guilty or Not, any & all verdicts dispensed devoid of full jury trials all the way to verdict should be illegal.
Those that rely on these Reports should get what they are paying for vs. simply accepting such vagueness.
Therefore, the article reads like an advertisement.

Posted by: Thomas Griffith | Dec 5, 2017 10:42:20 AM

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