Advisor Group’s SagePoint Financial grabbed 29 advisors with more than $1.9 billion in client assets under administration, but regulators singled out one of the new recruits for heightened supervision.
Paul Mauro of Legacy Financial Advisors joined from SII Investments on the condition of five years of enhanced oversight,
SagePoint added Mauro, whose practice manages $776 million in AUA,
Heightened supervision demands greater compliance resources such as bulked-up reviews and disclosures — and Massachusetts regulators require it when some advisors switch firms. Major rival firms Commonwealth Financial Network and Lincoln Financial Network do not hire advisors under heightened supervision.
The consent order from Secretary of the Commonwealth William Galvin’s office requires an office of supervisory jurisdiction manager to approve any sales of securities for Mauro’s clients from the state, among other obligations. Willful violations of the order carry up to 10 years in prison or a $100,000 fine.
Mauro has “had numerous interactions with regulators over garden variety issues” over his 43-year career while working with 6,793 client accounts and more than 40 other advisors, Mauro said in an email.
“Sagepoint was instrumental in creating an environment for business going forward” allowing the practice to operate, but not in a way that will “expose me personally to every case that goes through the office,” he said.
-
Advisor Group set a record for its recruiting in 2017, and Securities America announced more than a dozen fourth-quarter grabs.
January 25 -
The No. 20 IBD unveiled a total of 15 practices joining its ranks in the fourth quarter.
December 21 -
Though some say the rule's future is in doubt, the firm is going ahead with sweeping changes it hopes will make its advisers more competitive.
January 10
Among recent career changes, Merrill Lynch lost brokers managing $2.2 billion to rival J.P. Morgan Securities.
Mauro went to SagePoint after LPL Financial
Downs’ Milwaukee-based practice, which has $900 million in AUA, moved in late August, while Portland and Lewiston, Maine-based BGA Financial, which has $315 million, moved in late February, BrokerCheck shows. Michael McNamara, a spokesman for their former IBD, MML Investors, declined to comment on their exits.
Last year was the biggest for recruiting since SagePoint CEO Jeffrey Auld joined the Phoenix-based IBD roughly a decade ago, Auld says. The firm constitutes Advisor Group’s second-largest IBD out of its four and the No. 20 firm on Financial Planning’s
“The momentum has carried over into this year,” Auld says. “At the end of this quarter, we’re already more than halfway towards meeting our 2018 goal.”
Auld declined to discuss the agreement with Galvin’s office, and SagePoint spokeswoman Clare McLaughlin later said in an email that the Phoenix-based firm has a policy against providing comment on the details surrounding state regulatory actions.
SagePoint cannot permit Mauro to have discretion in any Massachusetts clients’ accounts nor give him “any principal, supervisory or managerial duties” for five years, according to the consent order. OSJ manager Michael Tartarini must review all new client account forms and securities transactions.
In addition, the regulator mandates that a home office principal must conduct quarterly checks of the transactions in 10% of Mauro’s accounts in the state and that SagePoint’s annual audits include examinations of all of the Massachusetts accounts.
“All reviews shall be undertaken to detect and prevent potential securities violations and be memorialized in writing,” the document says. The order also obliges Mauro and the firm to disclose any client complaints or investigations of him to the regulator within 10 days.
Galvin’s office required the conditional registration order based on his disclosure history, spokeswoman Debra O'Malley wrote in an email. The Massachusetts Securities Division “looks at all agents switching firms as new registrations, and the conditional orders are required on an as-needed basis,” she said.
Mauro has 14 disclosure incidents, including nine client complaints, the document shows. His first firm, John Hancock, fired him in 1987 for selling insurance policies not available through the firm, according to the consent order.
Later, he faced a tax lien and three counts of tax evasion charges and paid a $6,500 fine, the document states, for a failure to report two misdemeanor traffic tickets on a life insurance seller application with the state.
However, Mauro was released from the lien in 2002 and acquitted of all charges in the tax evasion case. FINRA arbitrators also denied or dismissed six of the nine client arbitration claims, according to BrokerCheck. Settlements of the three other cases amounted to a combined $690,502.
In comments on BrokerCheck, he said that a former business associate had made a false allegation to the IRS resulting in the charges. In regards to the largest client settlement of $650,000, he responded that he didn't pay any of the money in connection with an errors and omission insurance claim.
“All of the matters listed as a basis for the order took place in the past, prior to joining SagePoint,” Mauro wrote in response to the heightened scrutiny order. “As a condition of moving my registration from my prior broker-dealer to SagePoint, my firm and I were required to provide undertakings, and consent to the entry of this order.”
