FINRA Suspends Cambridge Rep Over Concealed Investment Referral Arrangement
A registered representative at Cambridge Investment Research has been suspended for three months and fined $5,000 by the Financial Industry Regulatory Authority after concealing a referral arrangement with a tax consultancy that generated $30,000 in fees from approximately $495,000 in tax-oriented investments purchased by his clients.
The settlement, accepted by FINRA on June 12, involves Shuai Wang, who has been registered with Cambridge since March 2011. According to the letter of acceptance, waiver and consent, Wang entered into a referral arrangement with the consultancy in August 2021 without providing prior written notice to Cambridge as the firm’s supervisory procedures required. Wang earned percentage-based referral fees when clients he referred purchased tax-oriented investments offered through a leveraged charitable giving program.
Wang referred 26 Cambridge customers and one former customer to the consultancy over the course of the arrangement. Seven of them purchased approximately $495,000 in products through the program. The matter originated from a FINRA Rule 4530 filing made by Cambridge.
When Wang belatedly sought his firm’s approval of the outside business activity in January 2022, he provided materially inaccurate disclosures. He misstated the arrangement’s start date, reported only $1,000 in expected annual earnings despite having already earned approximately $4,500 in referral fees, and claimed he merely made introductions. In fact, FINRA found, Wang facilitated and participated in all communications between clients and the consultancy, collaborated with the consultancy to select which products to pitch to clients, and in some instances directed specific analyses modeling investment returns.
Wang also failed to update his outside business activity disclosure as the arrangement continued and falsely attested in Cambridge’s annual compliance questionnaire that he had fully and accurately disclosed all outside business activities to the firm. FINRA found Wang violated Rules 3270 and 2010.
The AWC does not identify the tax consultancy by name. Wang’s three-month suspension in all capacities becomes effective three weeks after FINRA’s notice of acceptance.
The action is the third FINRA enforcement matter involving Cambridge representatives or the firm itself to surface in recent months. In April, FINRA fined Cambridge $150,000 and ordered nearly $130,000 in restitution over a seven-year failure to adequately supervise variable annuity exchanges. In May, FINRA fined the firm $200,000 and ordered $389,000 in restitution over a Regulation Best Interest supervisory failure involving a representative who repeatedly recommended early unit investment trust liquidations.
Cambridge, headquartered in Fairfield, Iowa, supports approximately 4,900 registered representatives across 2,800 active branches.
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