Skip navigation

Liability for a registered rep after resigning from broker-dealer

or Register to post new content in the forum



  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Dec 11, 2010 11:54 pm


I am curious - how much liability to I have personally if an past disgruntled client tries to sue or enter arbitration against me personnally?

The summarized situation is that I recently resigned from my B/D to become a fee-only RIA.  When I was a rep of the B/D, myself and many others sold interests of a Reg-D private placement investment that recently blew up.  Investigations done by FINRA, SEC, and the B/D have concluded no fraud occurred, but there was just mismanagement on the part of the investment partnership's managing owners.  It just seems like a rash case of very bad luck.

One of my past clients, who I have no intention on bringing onto my new firm, has been panicking about the private placement's meltdown over the past several months and becoming very agitated and emotional, despite my efforts to keep them "in the light" and updated on the situation at all times.  The placement makes up a portion of their liquid assets and an even smaller portion of their net worth.  

Since they keep contacting me for details and I no longer am under the umbrella shield of the broker-dealer and CCO, what are my responsibilities at this point and my liabilities?  Although I know the investment's meltdown wasn't the fault of me or my old b/d, I have read many times in publications that clients can still try to sue or go to FINRA if they are desperate and emotional enough.  I don't want my U4/5 polluted, especially as a new RIA, and I don't want to be shelling out money on a frivolous legal proceeding with these disgruntled folks and FINRA.

I'm going to assume that the old clients' only recourse is to complain to FINRA and/or sue the old broker-dealer, but not me.  Is this assumption true, since no fraud or misrepresentation was present - just me being the broker of a bad investment?

Thanks for your input.