Examining Firm Liability for Third-Party and Client Misdeeds
From the desk of Jim Eccleston at Eccleston Law
FinancialPlanning.com recently asked, “How much liability can a firm have for the actions of third-party vendors or clients?” This question has surfaced in various legal contexts, most recently in a lawsuit against Wells Fargo, which faces allegations of failing to detect a $300 million Ponzi scheme perpetrated by a client.
FINRA arbitration panels previously held Bank of New York Mellon's Pershing subsidiary accountable for a notorious Ponzi scheme, demonstrating that firms can be liable for client actions. On the vendor side, regulators consistently remind firms that their liability extends beyond their operations. FinancialPlanning.com also reports that the Securities and Exchange Commission (SEC) has proposed a rule that would require wealth managers to ensure their third-party vendors comply with fiduciary standards.
The evolving regulatory landscape underscores that liability does not end at a firm's threshold. Firms must remain vigilant and proactive in monitoring their clients and third-party vendors to mitigate potential risks and uphold industry standards.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law