SLCG Releases "How Widespread and Predictable is Stock Broker Misconduct?"

WASHINGTON, June 2, 2016 /PRNewswire/ -- Securities Litigation and Consulting Group, Inc. ("SLCG") has issued a comprehensive study of the extent and possible prevention of stock broker misconduct based on FINRA's BrokerCheck data.  The report's primary authors are Craig McCann, Mike Yan and Chuan Qin.  Dr. McCann and Dr. Yan are Principals and Dr. Qin is a Senior Financial Economist at SLCG. 

The SLCG study analyzed disciplinary and employment history for more than 1.2 million brokers to demonstrate how BrokerCheck data might be developed to rate brokerage firms based on how likely their brokers are to harm investors in the future.

Dr. Yan explains that this study demonstrates that almost 5% of the 296,000 brokers currently registered with four or more states have been subject to customer complaints resulting in arbitration awards or substantial settlements. This is much more than prior estimates and suggests broker misconduct is widespread.

Dr. Qin says the ability to predict which brokers are more likely to engage in misconduct is possible with the BrokerCheck data and sophisticated statistical analysis. "We've demonstrated that the BrokerCheck data, if truly public, would allow us and others to tell investors which brokers and brokerage firms are more likely to cause future investor harm."

Dr. McCann points out that only by analyzing a large sample of brokers, researchers can identify brokers more likely to harm investors. He says, "It is a classic fallacy of composition to believe that because information on individual brokers is available BrokerCheck and, in the aggregate, this information is useful for separating high risk brokers from lower risk brokers that useful information is publicly available." The authors urge regulators to make BrokerCheck available in bulk so researchers can develop simple, informative metrics that investors could use to protect themselves.

This study and other working papers are available at slcg.com/securities-research.php

Securities Litigation and Consulting Group, Inc. ("SLCG") is a financial economics consulting firm based in the Virginia suburbs of Washington, DC. SLCG provides consulting services and expert witnesses to law firms, corporations, individuals and state and federal agencies involved in complex litigation throughout the United States.

For further information about SLCG or its research, please contact Dr. McCann at 703-246-9381 or [email protected], Dr. Qin at 703-539-6778 or [email protected] and Dr. Yan at 703-539-6770 or [email protected] or visit us at www.slcg.com.

SOURCE Securities Litigation and Consulting Group, Inc.

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