Brokerage Firm Review: Northwestern Mutual Investment Services, LLC

Northwestern Mutual Investment Services, LLC (“Northwestern Mutual”) (CRD# 2881) has many different complaints filed by FINRA (Financial Industry Regulatory Authority), state regulatory organizations, and investors such as yourself. At the Law Offices of Robert Wayne Pearce, we have investigated Northwestern Mutual, its regulatory and customer complaints, and have also represented investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors.

If you believe you have a claim against Northwestern Mutual, you should strongly consider hiring an investment fraud lawyer. You should not wait until it’s too late to file a claim. The Law Offices of Robert Wayne Pearce, P.A., offers free consultations. Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Can I Sue Northwestern Mutual Investment Services?

If you’ve lost money caused by Northwestern Mutual and/or its employees’ misconduct then the answer is, YES,  you can sue Northwestern Mutual but the odds are you signed away your right to sue in court and agreed to resolve your dispute in a FINRA arbitration proceeding.  Attorney Robert Wayne Pearce has over 40 years of personal experience in FINRA arbitration proceedings and knows very well how you can not only sue Northwestern Mutual in FINRA arbitration proceedings, but WIN that arbitration. The easiest way to know if you have a viable case against Northwestern Mutual is to call Attorney Pearce at our office at 800-732-2889.

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

What is Northwestern Mutual Investment Services?

Northwestern Mutual (CRD# 2881) was first registered in 1968 as a securities broker-dealer with the SEC and FINRA.  The company is controlled by Northwestern Mutual Life Insurance Company and headquartered in Milwaukee, Wisconsin.  Its independent broker-dealer Business Model has grown through acquisition and organic development of primarily one and two person registered representative offices supervised remotely. Today there are over 1000 Northwestern Mutual branch offices with over 3000 registered representatives in every state. These representatives are dually registered life insurance agents whose business is generally focused upon selling Northwestern Mutual life insurance and annuity products.  It is now one of the top 5 independent broker-dealer and investment advisory firms in the United States.

Northwestern Mutual Investment Services Has Many Different Regulatory Problems 

Northwestern Mutual’s rapid growth has not been without consequences. There have been approximately 8 state and self-regulatory body disclosure events; that is, final and formal proceedings initiated by a regulatory authority (e.g., a state or federal securities agency like the U.S. Securities and Exchange Commission (SEC) or self-regulatory body like the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) ) for a violation(s) of investment-related rules or regulations. In addition, there have been hundreds of customer complaints filed against Northwestern Mutual for misconduct by its securities sales and investment advisory representatives that are not reported by the firm on its Central Depository Record. 

We have reported and written about these regulatory problems and customer complaints over many years. Northwestern Mutual is a repeat offender: there are over 7 FINRA reported disciplinary proceedings citing the firm with one form of supervisory lapses or another in the last decade.

A BRIEF OVERVIEW OF SOME OF THE REGULATORY PROBLEMS NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC HAS FACED OVER THE YEARS*

Northwestern Mutual has been repeatedly censured, warned, and fined over $1 million for its own misconduct and failure to supervise its army of financial advisors.* A few of the notable FINRA Sanctions for its Supervisory Failures are below:

FINRA Sanctions Northwestern Mutual For Not Safeguarding Customer Assets

FINRA investigated and discovered a registered representative associated with Northwestern Mutual converted $473,496 from five of his customers’ variable annuities. In addition, on four occasions during the relevant period, the financial advisor effected unauthorized transfers of funds totaling $121,123 from two customers’ variable annuities to another customer’s bank account, in order to conceal his previous conversion from that customer.  Further, FINRA’s investigation revealed that Northwestern Mutual failed to establish, maintain and enforce a supervisory system that was reasonably designed to review and monitor the transmittals of funds from the accounts of customers to third party accounts and outside entities which undoubtedly enabled the financial advisor to convert customer assets.  FINRA concluded that Northwestern Mutual acts and omissions violated NASD Rules 3010 and 3012(a)(2)(B)(i), NASD Rule 2110, FINRA Rule 3110 and FINRA Rule 2010, censured and fined the company $350,000. 

Click to read more.

FINRA Sanctions Northwestern Mutual For Auction Rate Securities Sales Abuse

FINRA launched an investigation and discovered Northwestern Mutual violated NASD rules relating to communications in its marketing and sale of auction rate securities (“ARS”) and failed to maintain adequate supervisory procedures concerning its sales and marketing activities regarding ARS, as required by NASD and MSRB rules.

It found that during the relevant period, Northwestern Mutual used internal marketing materials for ARS that were not fair and balanced and did not provide a sound basis for evaluating the facts in regard to purchases of ARS. Among other things, the materials did not contain adequate disclosure of the risks of ARS, including the risks that ARS auctions could fail, that investments in ARS could become illiquid, and that customers might be unable to obtain access to funds invested in ARS for substantial periods of time.  Thus, FINRA concluded the materials violated NASD Rule 2211.

In addition, FINRA found Northwestern Mutual also failed to establish and maintain a supervisory system, including written supervisory procedures, that was reasonably designed to achieve compliance with NASD and MSRB rules in the marketing and sale of ARS. For instance, Northwestern Mutual failed to maintain policies and procedures that were reasonably designed to ensure that registered representatives: (a) accurately described ARS to customers and (b) provided customers with full disclosure of the risks of ARS investments. Northwestern Mutual also failed to provide adequate training to registered representatives regarding the features and characteristics of ARS, especially those affecting liquidity.

In the end, the FINRA determined that Northwestern Mutual violated NASD Rules 2211, 3010, and 2110 and MSRB Rule G-27 and censured and fined the firm $200,000. 

Click to read more.

FINRA Sanctions Northwestern Mutual For Mutual Fund Sales Abuse

As a result of another FINRA investigation, it was discovered that Northwestern Mutual failed to provide certain investors the opportunity to purchase Class A shares of certain mutual funds at net asset value (“NAV”), In particular, certain mutual funds offered “NAV Transfer Programs” that allowed investors to purchase Class A shares at NAV and not pay any sales charges, if the customer invested proceeds from the redemption of shares of a fund of another mutual fund family within specified time frames and previously had paid either a front-end or back-end sales charge.

During the relevant period, Northwestern Mutual failed to exercise reasonable due diligence to identify the essential terms and conditions of the NAV Transfer Programs of certain mutual funds, and failed to establish, maintain and enforce a system and procedures to ensure that all of its customers received NAV pricing when appropriate. As a result, certain investors who were eligible to purchase Class A shares under NAV Transfer Programs (1) purchased Class A shares and incurred front-end sales charges that they should not have paid, and/or (2) purchased other share classes of these mutual funds and thereby became subject to back-end sales charges, also known as contingent deferred sales charges (“CDSCs”), as well as higher ongoing distribution and service fees (“Rule 12b-l fees” or “fees”), typically associated with share classes other than Class A.

Notwithstanding misconduct which undoubtedly affected thousands of Northwestern Mutual customers, FINRA only censured the firm and fined it $100,000. 

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FINRA Fines Northwestern Mutual For Variable Life Insurance Training Abuses

During another one of FINRAs investigations, it found that the Northwestern Mutual violated NASD Rules 3010 and 2110 for failing to supervise a registered representative in connection with training seminars that he conducted for Northwestern Mutual regarding variable life insurance. Northwestern Mutual was aware that these presentations were unbalanced and inappropriate. Northwestern Mutual was censured and fined $ 1,000,000 and required to pre-file with the NASD Advertising Regulation Department all institutional sales materials used for educational purposes relating to internal seminars and training sessions concerning variable life insurance products prior to their first use for one year.  

Click to read more.

Why Does Northwestern Mutual Investment Services, LLC Have So Many Regulatory Problems And Customer Complaints?

Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of these franchise type operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with on-site manager, compliance officer and operation personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and therefore not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors’ rights and interests as their lowest priority.

The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor’s compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these Independent broker-dealers. 

Generally, there is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to sales of securities that have not been reviewed or authorized by anyone other than the sales representative earning a commission. There may be no one onsite to detect forgeries of clients’ signatures on documents, the placement of inaccurate information about a client’s investment objectives and financial condition to document the suitability of a particular investment recommendation. Oftentimes there is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, it is not unusual for there to be only one compliance audit visit per year at many of these offices.

These Independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms than the traditional brokerage firms with branch offices with on-site managers and compliance personnel.

Did Northwestern Mutual Investment Services, LLC Advisor Misconduct Cause You Investment Losses?

When financial advisor misconduct has caused you to lose substantial value to your investment accounts, you have the right to seek reimbursement from the responsible parties. Northwestern Mutual is responsible like any employer for its financial advisors acts and omissions. In addition, it has an independent duty to supervise its stockbrokers and investment advisors. These cases can be extremely complex, and so having the support of a reputable attorney who is experienced in recovering investment losses for investors is key to your success. Many customers make the mistake of contacting Northwestern Mutual without representation with an attorney about their complaints and have their complaints denied.

Related Read: Can You Sue Your Brokerage Firm?

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

Consult With An Attorney Who Recovers Investment Losses Caused By Northwestern Mutual Investment Services Today!

The securities lawyers at The Law Offices of Robert Wayne Pearce, P.A., have helped countless investors over the last 40 years recover the losses from their investment accounts that were caused by broker negligence or misconduct. The firm has extensive experience with Northwestern Mutual cases, and Attorney Pearce is committed to seeing that those responsible for the losses you have suffered are held fully accountable.

Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Robert Wayne Pearce

Robert Wayne Pearce of The Law Offices of Robert Wayne Pearce, P.A. has been a trial attorney for more than 40 years and has helped recover over $170 million dollars for his clients. During that time, he developed a well-respected and highly accomplished legal career representing investors and brokers in disputes with one another and the government and industry regulators. To speak with Attorney Pearce, call (800) 732-2889 or Contact Us online for a FREE INITIAL CONSULTATION with Attorney Pearce about your case.

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