FINRA Orders Cambridge to Pay $280K Over Seven-Year Supervisory Lapse

The Financial Industry Regulatory Authority censured and fined Cambridge Investment Research $150,000 and ordered it to pay nearly $130,000 in restitution after finding that the Fairfield, Iowa-based independent broker-dealer failed to maintain an adequate supervisory system to monitor deferred variable annuity exchanges over a seven-year period.

According to the letter of acceptance, waiver, and consent, Cambridge lacked the necessary reports, alerts, or written supervisory procedures, or WSPs, to surveil the rates at which its representatives exchanged deferred variable annuities between January 2018 and February 2025.

FINRA Rule 2330(d) specifically requires member firms to implement surveillance procedures to detect “inappropriate exchanges” – transactions that may be inconsistent with federal securities laws or FINRA rules. Cambridge’s supervisory gaps resulted in the firm missing 22 inappropriate exchanges made by a single former registered representative.

Those transactions impacted 14 customers, who collectively incurred $129,938.79 in unnecessary surrender fees. Consequently, FINRA found Cambridge in violation of: FINRA Rule 3110: failure to establish and maintain a reasonable supervisory system; FINRA Rule 2330(d): failure to surveil variable annuity exchange rates; and FINRA Rule 2010: failure to observe high standards of commercial honor and equitable principles of trade.

Without admitting or denying the findings, Cambridge consented to a censure, a $150,000 penalty, and a restitution payment of $129,938.79 plus interest to the affected customers.

Cambridge has until late July 2026, 120 days from the AWC acceptance, to provide FINRA with proof that the restitution has been paid to the eligible customers listed in the settlement.

The investigation into Cambridge originated from a separate inquiry into the former representative involved in the exchanges. In response to the regulatory findings, Cambridge reported that it revised its WSPs in February 2025. The firm’s updated procedures now include enhanced surveillance for variable annuity surrenders and specific monitoring of exchange rates to prevent future misconduct.

Cambridge currently supports approximately 4,900 registered representatives across 2,800 active branches.

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