Cetera Brokers Endure Two-Day Systemwide Crash
(Adds names of Cetera’s seven broker-dealers in tenth paragraph.)
Just six months after emerging from bankruptcy, independent brokerage company Cetera Financial Group experienced a companywide systems outage Monday and Tuesday that walled off brokers at its seven operating broker-dealers from customer data, emails and other vital account management functions.
The outage lasted from Sunday evening through late Tuesday afternoon, company executives said.
“My sincere apology for any disruption this has caused for you and your businesses,” Cetera Chief Executive Robert Moore said Tuesday on a firmwide conference call at 4:15 pm (EST) that lasted about 15 minutes. “At this time I understand that all systems have been fully restored.”
Cetera continues to look for the root cause of the network outage that crossed through the El Segundo, Calif-based company’s two data centers and then “cascaded into other databases,” affecting all of its 9,000 brokers as well as the company’s back-office and operations teams, Chief Information Officer Mukesh Mehta said on the call.
“Recovery of those databases was a structured and, unfortunately, slow process,” he said. “That took a significant amount of time, which has impacted each of your offices.”
He and Moore emphasized that no data was compromised through hacking or any other means, and said they would communicate the causes to brokers as soon as they reached conclusions. The company has hired a third-party consultant to help with the review, Moore said.
A First Allied broker said he could not sign in to see emails, get access to performance reports, rebalance accounts, put in batch requests across accounts or reach Cetera by phone (until he was given some cellphone numbers Monday evening). While the broker had direct access to input trades on a client-by-client basis through Pershing, First Allied’s clearing firm, he could not transfer cash across his investment model into bond funds to take advantage of his belief that they are a buy after the asset class’s post-election battering.
Many brokers had even less access since they do not have straight-through processing. “They couldn’t get in,” one broker said. “They were dead in the water.”
A spokesman for Cetera said firm executives were not immediately available to comment further on the causes or on what accommodations the broker-dealer might make to its independent contractors and their clients.
The seven firms within the Cetera “network,” each marketing itself as distinctive with different client niches and supervisory oversight, are: First Allied Securities, Summit Brokerage Services, Girard Securities, Cetera Advisors, Cetera Financial Specialists, Cetera Advisor Networks and Cetera Financial Institutions.
“Founded to be of service to you,” Cetera Financial tells the independent brokers at the top of its home web site. “Cetera Financial Group’s founding principle is to be of service to others; to you and the clients you serve. It’s a commitment we carry forth in everything we do, and is the inspiration for our name. It’s the difference that makes all the difference.”
Cetera Financial Group is an amalgam of independent firms that supplies products, compliance, bookkeeping and trading services to independent brokers. It was built as a selling network by real estate investment trust mogul Nicholas Schorsch in a two-year acquisition spree in 2013 and 2014. Schorsch resigned under pressure from his executive posts at Cetera and related holding companies in 2014 and 2015.
Moore, a former executive at LPL Financial, the largest independent broker-dealer, became CEO of Cetera Financial in September.