Woodbury Financial settles with regulators over adviser background checks

As part of a settlement last month with securities regulators in Arizona, Woodbury Financial Services Inc. agreed to tighten its policy of looking into the financial backgrounds of their 1,750 reps and advisers.

As part of a settlement last month with securities regulators in Arizona, Woodbury Financial Services Inc. agreed to tighten its policy of looking into the financial backgrounds of their 1,750 reps and advisers.
According to a statement from the Arizona Corporate Commission, the Woodbury, Minn.-based firm made the changes in its policies as part of a settlement that included a $250,000 penalty for failure to supervise two advisers based in Tucson.
Tim Benedict, a spokesman for Woodbury and its parent, The Hartford (Conn.) Financial Services Group Inc., did not return calls seeking comment on Thursday.
Woodbury had already reimbursed more than $2 million to the victims of Mayra Angulo and Mark Islas, who defrauded 30 clients.
In February were stripped of their respective licenses to sell securities.
The Arizona settlement, announced on May 20, focuses on increased background checks and audits of Woodbury advisers.
In May, Woodbury told its advisers that during audits it would increase its scrutiny of personal financial information of advisers, their spouses, and “significant others,” defined as those with whom reps and advisers have lived for more than six months (InvestmentNews), June 8,
In a question-and-answer communiqué to reps on May 27, as well as in a letter from Brian Murphy, Woodbury’s CEO, no mention was made of the Arizona settlement.
Woodbury cited “industry trends and representative fraud” as reasons why it is now collecting more financial information from reps during field audits.
In response to the fraud committed by the two ex-Woodbury advisers in Arizona, the firm “has increased the number of unannounced audits of its registered securities salesmen,” the state Corporate Commission statement said.
“Additionally, Woodbury Financial Services implemented a program that includes background checks for unreported criminal activity and credit checks to identify those securities salesmen who are in financial trouble and may pose a potential risk to their clients and securities dealer.”
In the settlement, Woodbury neither admitted nor denied the regulator’s findings.