Unlike many other industries, brokerage firms have statutory obligations to supervise the conduct and activities of their brokers.  Brokerage firm supervisors, also known as securities principals, have to, among many other things, review and approve all new brokerage account applications, review all transactions submitted by the broker to ensure that the recommendations are suitable for the customer based on the customer’s investment objectives and risk tolerance and to determine whether or not the trading in the customer’s account was excessive, and to detect any other patterns of abuse by the broker.  If a brokerage firm or securities principal fail to supervise their brokers, they may be liable for any losses incurred as a result of the failure to supervise.

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