Robinhood Restricts GameStop, AMC, Other Securities – Do Investors Have Claims?

Can investors bring a claim against Robinhood and other self-directed platforms for the recent purchase restrictions on GameStop, AMC, and other securities? The internet is buzzing with talk of class action lawsuits.  Our office is fielding inquiries.  But – from a claimants’ attorney perspective – there are high hurdles to overcome.

The securities trading platform Robinhood is under fire – again.  In December 2020, the trading platform agreed to a cease-and-desist order from the SEC, based on allegations of misleading customers regarding order execution quality and the hidden higher costs to its users compared to other broker’s prices.  Robinhood agreed to pay a $65 million civil penalty as part of that agreement.

Now, retail investors are slamming Robinhood, TD Ameritrade, and other platforms for restricting purchases of GameStop, AMC, Nokia, Blackberry, and other securities.  A significant portion of the news reporting this week has addressed various brokerage firms’ refusal to accept orders on those securities, and whether there’s any sort of recoverable loss associated with the refusals.  Legislators are posting on Twitter and demanding explanations in support of angry investors, and the SEC is “monitoring” the situation.

There’s a lot going on, and no single answer to the question.

Share values have zoomed upwards over the past few days.  Notably, this isn’t a total restriction on all trading of these shares.  The platforms still allow sales.   Given that the trading price surge is apparently due to retail investors rallying to snub institutional investors (like hedge funds) who have been shorting these companies, and thus profit off of falling stock value, this limited trading restriction appears to benefit the Goliaths over the Davids.   The prohibition of buy orders, and allowance of sell orders, has naturally driven the stock prices down, thereby protecting those who shorted the stocks.

Isn’t this “market manipulation” by the platforms, for the benefit of the institutional Goliaths?

The restrictions have an effect on the market – but whether or not it was unlawful “manipulation” with recoverable damages will likely be played out in the courts.  Here are five hurdles off the bat for retail investors wanting to sue these platforms:

First, the stock exchanges are also restricting trading activity.  For example, the New York Stock Exchange instituted a number of temporary trading halts on GameStop and AMC.  The halt is imposed, orders build, and when trading opens, the execution of the pent-up orders serves to move the stock price to a degree that triggers yet another market-based trading halt.  The NYSE is allowed to impose halts under a number of different regulatory rules.  There’s likely no wrongdoing there.

Second, some of the refusals are coming at the hands not of the brokers, but their clearing firms.  The president of WeBull has gone on record as saying that his clearing firm shut down the trading in those securities.  And to bolster the argument, the user agreement you signed when you opened your account probably had you expressly acknowledge and agree that the platform isn’t liable if a third-party clearing firm is causing the problem.

Third, for Robinhood, the very nature of their structure makes it difficult to fill orders on highly volatile stocks.  Your user agreement probably has language that says the firm will not actually accept traditional market orders.  Rather, every “market” order is really a limit order, to be filled at a price up to 5% higher than the last traded price.  Thus, if the stock price is moving upward quickly, it’s possible if not outright likely that the price will never be within that 5% band, and the order will therefore never fill.

Fourth, if you’re trading on margin, the brokerage firms can and have tightened margin restrictions on highly volatile stocks. Where you might have to maintain a 50% cushion for some securities, the restriction for these securities is now far higher.   It makes sense.  Firms aren’t willing to loan money to buy super volatile securities.  You would be hard-pressed to win a claim that the decision to not extend margin in these circumstances is an unreasonable decision.  By tightening margin requirements, the firms can shut down trading without actually shutting it down.

Fifth, these account contracts generally allow the brokerage firm to use its discretion to decline trades.  A quick look at Robinhood’s user agreement finds language “I understand Robinhood may at any time, in its sole discretion and without prior notice to Me, prohibit or restrict My ability to trade securities.”   Contractual terms may be challenged for various reasons, and the SEC can prohibit regulated firms from certain exculpatory and other types of language.   But broadly speaking – this kind of authorization to refuse trade instructions tends to hold up.

Online brokerage firms are also required to make commercially reasonable decisions and potentially reject trade instructions that don’t line up with an account’s trading objectives.  Meaning, if you have marked a “moderate” risk tolerance for your account, the firm should theoretically reject a trade in AMC or GameStop since those trades under current conditions are beyond speculative.

What are the damages?

Finally – even if there are potential private causes of action for retail investors to sue the platforms for restricting purchases, there may be a high hurdle to cross regarding determining what damages may be recoverable.

Assuming that share prices keep going up, even if the firm should not have rejected your trade instruction, could you recover damages?  The problem there is that the damages calculation is very speculative.  Your complaint is that you couldn’t buy the stock at “X” price.  Unless you have strong documentary evidence that you had the intent and ability to buy “Y” number of shares, your word alone may not be enough to carry your burden of proof.  Equally problematic is the issue of when you would have sold the securities.  It is highly unlikely that a court, jury, or arbitration panel is going to believe that you would have magically sold at the high point before the stock inevitably crashed to the appropriate valuation.  Once again, you’d have to prove the date, price, and amount of shares you otherwise would have sold.

How about an argument, once the share value starts dropping, that the platforms’ trading restrictions caused a market drop?  A drop in share value is a likely effect of the restriction. But does that mean the platform should be responsible for investment losses?  Even assuming it was a violation of law for the platforms to put the purchase restriction in place, and that the restriction was proved to be the cause of losses, damages calculations are still a speculative moving target.  If you can still sell your shares, the defense becomes that you failed to mitigate your losses by not selling when you could.

These problems inherent in calculating damages could be strong arguments to defeat an attempted class action case.

What now?

There are, of course, other harms caused by wild market volatility and trading platform restrictions.  Public confidence in our securities industry erodes when it looks like the rules and regulations meant to protect the Davids out there are doing more harm than good.   However, as should be clear now, securities regulation is incredibly complicated and can’t respond on a dime.

Based on current publicly available information, it is difficult to see a path forwards for recoverable claims by retail investors against self-directed platforms relating to the purchase trading restrictions of these securities.  That situation may change as more information becomes available.  More likely is that we’ll see regulation that addresses these issues and tries to ensure that pricing anomalies like these don’t happen again.

However, if a FINRA-registered broker-dealer recommended and sold you the stock, depending on the circumstances of the sale, your investment objectives and risk tolerance, and other factors, you may have a claim against the broker-dealer for your investment losses.  If you have questions about your investments feel free to call us or use our online inquiry tool.  We’ll be happy to speak with you and and see if we can offer assistance.

Darlene Pasieczny, AttorneyDarlene Pasieczny is a fiduciary and securities litigator at Samuels Yoelin Kantor LLP.  She represents clients in Oregon and Washington with matters regarding trust and estate disputes, financial elder abuse cases, securities litigation, and appellate cases.  She also represents investors nationwide in FINRA arbitration to recover losses caused unlawful broker conduct.  Her article, New Tools Help Financial Professionals Prevent Elder Abuse, was featured in the January 2019, Oregon State Bar Elder Law Newsletter.

 

Attorney Pasieczny at 40th Annual NWSI in Seattle

Darlene Pasieczny moderates panel at the 40th Annual Northwest Securities Institute (March 2020)

As current chair-elect of the Oregon State Bar’s Securities Regulation Section, attorney Darlene Pasieczny (pictured here moderating a panel via webcast) assisted with the program planning for the 40th Annual Northwest Securities Institute (NWSI) program in Seattle, Washington.  As part of this panel presentation, attorney Dan Keppler and SEC trial counsel Brent Smyth spoke on SEC receiverships, and attorneys Heidi Brooks Bradley and Diana Breaux spoke on the FHLB v. Credit Suisse litigation and the Securities Act of Washington.  The remaining program saw excellent presentations by SEC and state regulators (including Dorothy Bean from the Oregon Division of Financial Regulation) and securities attorneys from Oregon, Washington, and Canada, on a wide range of topics.   

Darlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, as well as fiduciary litigation in trust and estate disputes, and elder financial abuse.

 

 

FINRA Expungement Proceedings

SYK attorney Darlene Pasieczny Presents on FINRA Expungement Proceedings at PIABA’s Mid-Year Meeting.

On April 4, 2019, I joined co-panelist Kate McGrail and moderator Robert J. Girard II in Washington D.C. Together, we presented on FINRA expungement proceedings to an audience of securities attorneys, law professors, and state securities regulators attending PIABA’s Mid-Year Meeting.

Our main topics included:

  • The process for brokers to request expungement of customer dispute information from a broker’s CRD record.
  • The process for customer claimants to object to the request.
  • Proposed rule changes being considered by FINRA.

Current FINRA Rule 2080 of the Code of Arbitration Procedure for Customer Disputes provides the narrow grounds for expungement requests. FINRA Regulatory Notice 17-42 describes the potential changes including:

  • Limiting the time in which brokers may request expungement.
  • Creation of an Expungement Arbitrator Roster, with enhanced arbitrator qualification requirements, to hear expungement requests.
  • Requiring an additional finding that the customer dispute information has no investor protection or regulatory value.

The CRD is the Central Registration Depository, an online licensing and registration system for brokers and securities firms. Pursuant to FINRA rules, certain disclosure information must be reported for inclusion in the CRD record. This includes customer disputes – customer complaints, arbitrations and court actions.

Expungement of customer dispute information from a broker’s CRD record also means that the information is no longer publicly available through FINRA’s free online BrokerCheck. Because FINRA is clear that expungement is an “extraordinary remedy.”

That is in part because BrokerCheck is considered a major tool for investors to research the background of a financial professional. Wouldn’t you want to know if the person you are going to trust with your savings has a record of multiple customer complaints? Brokerage firms and state and federal securities regulatory agencies also use the CRD record when making hiring and licensing decisions, as well as in enforcement actions.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, as well as fiduciary litigation in trust and estate disputes, and elder financial abuse.

Attorneys Blachly & Pasieczny Present on Combating Financial Elder Abuse

Recent Tools to Combat Financial Elder Abuse”: a closer look at mandatory and permissive conduct for Oregon securities professionals.

Today, over 46 million Americans are 65 years of age or older. This accounts for nearly 15% of the population. According to the Population Reference Bureau, that number is projected to more than double by the year 2060. It will reach an estimated 98 million and 24% of the U.S. population. Approximately 1 out of every 10 Americans, age 60 and older have experienced some form of elder abuse. Estimates of financial elder abuse and fraud costs range from $2.9 billion to $36.5 billion annually

On Thursday, February 21st, SYK attorneys Victoria Blachly and Darlene Pasieczny will speak to the Oregon State Bar Securities Regulation Section about financial elder abuse in the securities industry. Their program “Recent Tools to Combat Financial Elder Abuse: Mandatory and Permissive Conduct Under FINRA Rules and Oregon Law for Securities Professionals,” will take a closer look at Oregon statues and FINRA rules regarding mandatory and permissive conduct for brokers and investment advisers when there is reasonable suspicion of financial abuse.

Meet the experts – Victoria Blachly and Darlene Pasieczny

Victoria Blachly is a fiduciary litigator, licensed in Oregon and Washington. She represents individual trustees, corporate trustees, beneficiaries, and personal representatives in often difficult and challenging cases including:

  • Trust and estate litigation
  • Will contests
  • Trust disputes
  • Undue influence
  • Capacity cases
  • Claims of fiduciary breach
  • Financial elder abuse cases
  • Petitioning for court instructions
  • Contested guardianship and conservatorship cases.

Darlene Pasieczny is a fiduciary and securities litigator. She represents clients both in Oregon and Washington, with matters regarding trust and estate disputes, financial elder abuse cases, securities litigation, and represents investors nationwide in FINRA arbitration. Her article, New Tools Help Financial Professionals Prevent Elder Abuse, was featured in the January 2019, Oregon State Bar Elder Law Newsletter.

Report abuse

If you suspect someone is being abused, neglected, or financially exploited, please reach out to the Oregon Department of Human Services. Also, you may consider hiring a private attorney to help employ legal tools to prevent harm, or recover financial losses.

Securities Attorney Darlene Pasieczny to Speak on FINRA Expungement Issues in Washington DC

Securities attorney Darlene Pasieczny will speak about FINRA expungement issues at the PIABA Mid-Year Meeting: Current Issues in Securities Arbitration. The panel presentation will be on April 4, 2019, in Washington DC.

Presentation topics to include:

Expungement of customer dispute information from a broker’s or brokerage firm’s CRD and Bro­kerCheck disclosure reports continues to be a heated topic for securities professionals. Expungement requests are routinely made in customer cases, sometimes years after settlement. Despite FINRA’s position that expungement of customer infor­mation should be an “extraordinary remedy,” panels routinely grant expungement requests in FINRA arbitration. This panel will discuss current trends in expungement requests and litigation tactics by attorneys and non-attorney firms, as well as re­cent FINRA expanded guidance to arbitrators and proposed amendments to applicable FINRA rules.  We will also discuss ethical considerations for lawyers regarding expungement.

Registration for the PIABA Mid-Year meeting can be done through PIABA’s website.

Why is FINRA expungement an important topic?

When an investor considers hiring a new financial advisor, they might look for publicly available information about the advisor’s background and customer complaints. FINRA’s BrokerCheck database is available online for exactly that kind of investor research. By current FINRA rules, a broker or brokerage firm must disclose certain customer dispute information on their CRD record. If FINRA grants expungement of that information, the disclosure is effectively wiped clean. That may be appropriate in some circumstances. But expungement can harm the investing public, who might otherwise think twice about hiring a broker with a negative track record.

Darlene Pasieczny’sSecurities Attorney Darlene Pasieczny practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, elder financial abuse, and complex civil litigation. Darlene’s practice includes representing investors nationwide in investment disputes through FINRA arbitration.

 

Elder Financial Abuse – Do I Have a Claim?

Oregon has strong protections for investors against fraud with our state blue sky securities laws.  The Investor Defenders attorneys at Samuels Yoelin Kantor LLP have deep experience with litigating securities cases to recover investment losses cause by financial advisor misconduct.

We also handle elder financial abuse claims. Sometimes those claims relate to securities, like a registered investment advisor mishandling an investment account, or an unlicensed person unlawfully selling investments.  But financial abuse of our seniors and other vulnerable persons can take many other forms

Under Oregon Law, an “elderly person” is anyone age 65 or older.  ORS 124.100(3).

Financial “abuse” includes “[w]rongfully taking or appropriating money or property, or knowingly subjecting an elderly person or person with a disability to alarm by conveying a threat to wrongfully take or appropriate money or property, which threat reasonably would be expected to cause the elderly person or person with a disability to believe that the threat will be carried out.”  ORS 124.100(1)(g).

The civil penalties are significant for abusers and persons who have “permitted” another to engage in the abuse.  The statutes allow recovery of three times all economic and noneconomic damages, and reasonable attorney fees incurred by the plaintiff.  ORS 124.100(2).

Samuels Yoelin Kantor LLP is one of the few firms in Oregon with equally strong estate planning attorneys and fiduciary litigation attorneys, who have the experience to recognize the signs of potential elder financial abuse, and know how to bring claims for victims of abuse.  Many of our attorneys are licensed in both Oregon and Washington, and litigate claims in both states.

Who can bring a claim under Oregon’s financial elder abuse statute?   The elder, a guardian, conservator, or attorney-in-fact for the elder, a personal representative for a decedent who was an elder at the time of the abuse, or a trustee for a trust on behalf of the trustor or spouse of the trustor who is an elder.  ORS 124.100(3).

The National Adult Protective Services Association reports that 90% of financial abusers are family members or trusted others.  And financial abuse is vastly under-reported: it is estimated that only one in 44 cases are reported to state protective services.

What are some common forms of financial abuse?   Misuse of a Power of Attorney or joint bank account, overcharging for services, or improperly transfer title to property.  Outright threats to abandon unless the victim complies with the abuser’s demands can by itself be financial elder abuse.

What are some warning signs of abuse?

  • An unexplained withdrawal, transfer, credit card charge, or payments that are unusual, or don’t otherwise fit with the explanation.
  • The elder is not given an opportunity to speak for themselves without the presence of a particular care giver, family member, or anyone else suspected of abuse.
  • The elder is extremely withdrawn, defensive, not communicative, or unresponsive. Victims frequently feel shame and embarrassment.
  • Unpaid bills, overdue rent, utility shut-off notices.

If you suspect a senior loved one may have been or is being financially abused, the attorneys at Samuels Yoelin Kantor can help.  Contact us to speak with an experienced fiduciary litigator who understands financial elder abuse claims in Oregon and Washington.

Darlene PasiecznyDarlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, elder financial abuse, and complex civil litigation. Darlene’s practice includes representing investors nationwide in investment disputes through FINRA arbitration.

Does My Investment Advisor Have Insurance?

Did you know – most stockbrokers and registered investment advisors (RIAs) are not required by law to carry errors and omissions insurance?

Beginning July 31, 2018, with an amendment to the Oregon Securities Law, Oregon became only state in the nation to require certain state-regulated financial professionals to carry errors and omissions insurance. These financial professionals must now carry at least $1 million in errors and omissions insurance in order to qualify for licensing in Oregon.

 

ORS 59.175 now provides:
. . .
(5)(a) Except as otherwise provided in paragraph (b) or (c) of this subsection, every applicant for a license or renewal of a license as a broker-dealer or state investment adviser shall file with the director proof that the applicant maintains an errors and omissions insurance policy in an amount of at least $1 million from an insurer authorized to transact insurance in this state or from any other insurer approved by the director according to standards established by rule.
(b) A licensed broker-dealer subject to section 15 of the Securities Exchange Act of 1934, as amended, is not required to comply with paragraph (a) of this subsection.
(c) A licensed state investment adviser who has its principal place of business in a state other than this state is exempt from the requirements of paragraph (a) of this subsection.

Why is this important?

Investors are rightfully confused about what protections they have when they sign over their life savings or transfer a retirement account to the care of a financial professional.  One might assume the advisor is insured, just like many attorneys, doctors, and other professionals are insured.

There is no current federal requirement for FINRA-registered brokers or SEC-registered investment advisors to carry basic errors and omissions (“E&O”) insurance. E&O insurance is a form of liability insurance for professionals who provide advice or other services. Some call it “professional liability insurance.”

You may have seen reference to “SIPC” on a sign in your advisor’s office, or on account statements from a firm. The Securities Investor Protection Corp. (SIPC) insures cash and securities in a brokerage account up to a certain amount of losses incurred because of the bankruptcy of a broker-dealer. SIPC does not cover losses caused by faulty or negligent conduct by the broker or brokerage firm.

Wait a minute – A financial advisor may handle millions and millions of dollars of investor money, but not carry insurance for professional misconduct?  Yes.

Investors may win a substantial recovery of losses that were caused by their financial professional’s misconduct, either through a FINRA arbitration award or court judgment. However, many awards and judgments go unpaid. A smaller firm may simply close shop rather than pay. Or a culpable advisor might leave his or her firm and start working for a business or investment vehicle that is not licensed by FINRA or the SEC. If there was applicable insurance that covered the investor claims, the insurance policy would pay the investor at least part if not all of the award or judgment.  Large firms that have significant net capital, or firms that otherwise responsibly carry insurance as a matter of choice, already provide reassurance that they can make good on a successful customer claim.

Generally speaking, E&O insurance should cover mistakes, errors, negligent conduct, and breaches of fiduciary duties by a professional relating to the professional service that result in harm to the client.  In the case of financial professionals, that usually takes the form of recoverable financial losses caused by unlawful conduct.  For example, losses caused by a broker (or RIA or someone dual-licensed as a broker/RIA) failing to follow client instructions, making recommendations to purchase investments that are “unsuitable” for that particular investor, or acting in a way that violates a fiduciary duty to the investor.

The good news for Oregon investors is that there are now at least some new protections at the state level, relating to certain financial professionals.  If you invest with a financial professional and want to know if they have E&O insurance – ask!  Responsible advisors and firms should be able to provide a clear explanation as to what protections their customers have in case of a customer claim to recover investment losses.

Darlene Pasieczny

Darlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, elder financial abuse, and complex civil litigation. Darlene’s practice includes representing investors nationwide in investment disputes through FINRA arbitration.

Mediation and FINRA Arbitration

Why mediate? What is mediation? Why do it in FINRA arbitration?

Simply put, mediation is a voluntary process by which disputing parties agree to negotiate with a professional referee – a neutral mediator – to try to settle a dispute. Settlement means resolving a case before incurring further time, costs, and the risk of losing when taking a case to trial or arbitration hearing, where a judge, jury or arbitrator makes the final, binding decisions.

I represent investors in FINRA arbitration and in court, in disputes with the financial industry.  Securities claims against stockbrokers and their firms are typically litigated in FINRA arbitration because there are pre-dispute arbitration clauses in just about every brokerage account agreement.  FINRA rules also provide that an investor may always choose to file claims against a broker or brokerage firm in FINRA arbitration.  FINRA IM-12000.

Arbitration is very different than mediation.  State laws provide the legal framework for arbitration as a binding alternative to trying a case in court.  An arbitration hearing may seem like a mini-trial:  you have one or more arbitrators in place of a judge and jury, you have opening and closing statements, present witness testimony and evidence, and submit briefs on legal issues.  At the end of the the process, the arbitrator or panel of arbitrators issues a binding arbitration decision and award.  A party may take that arbitration award to a court for confirmation as a judgment.  Once the award is entered in the court record as a judgment, the winning party is a judgment creditor and may use that state’s creditor laws to enforce and collect the award.  FINRA arbitration is a specialized forum with its own procedural code and discovery rules – a forum I know very well.

Mediation, on the other hand, is an entirely voluntary process, and a mediator makes no binding decisions that the parties must follow.  Parties can choose to mediate at any time – before a case is filed, or anytime during the case, with strategic decisions when mediation may be the most successful, such as after the exchange of discovery in a case.  State law provides that settlement discussions in the context of mediation are confidential and generally may not be used as evidence in a case.  So, if a mediation session does not result in a settlement agreement, neither side may use what was said or settlement offer dollar amounts exchanged during the mediation against the other side in the related court case or arbitration proceeding.   That’s because we want to encourage good faith negotiation during mediation.

If the parties come to settlement agreement during the mediation, the mediator, or one of the parties, will typically put at least the material terms of the agreement into writing while the parties are still present.  A good mediator will encourage this:  after hours of back-and-forth negotiation, no one wants to go home and get a message that the other side has “buyer’s remorse,” or denies coming to an agreement, and then have to litigate to enforce the settlement.

For my clients in FINRA arbitration, I often recommend trying a mediation session. Why?  The risks are small, and it can be a smart investment.  The parties typically share the cost of hiring a mediator, it’s non-binding, and we prepare as if preparing for the arbitration hearing. I use the time to refine my client’s case, learn about the strengths and weaknesses of respondent’s case, and have a kind of dress rehearsal of testimony – all while still negotiating in good faith towards a settlement.  So, even if a mediation does not immediately result in settlement, we are all better prepared for the hearing.

In a FINRA arbitration case, you want a securities attorney to help you select a FINRA arbitration panel and steer your case through the process, from legal analysis and damages calculations, through filing the statement of claim and discovery, to representing you at the hearing.  When mediating a securities case, you want a securities attorney experienced in mediation to help choose a mediator and stay by your side with analysis of the situation and recommendations during negotiation.  For both arbitration and mediation: these are not trials in courtrooms.  The rules, and the opportunities, are different.

If you have concerns about how your money is being handled by your financial professional, or concerns that you or a loved one might be the victim of financial exploitation, call me at 1-800-647-8130.  Consultations are free, and confidential.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice includes representing investors nationwide in investment disputes through FINRA arbitration.

What Does it Mean for Investors? LPL Financial Settlement $26 Million

Today the North American Securities Administrators Association (NASAA) announced a massive LPL Financial settlement with state securities regulators relating to over a decade of sales of unregistered securities by LPL brokers.

Under the terms of the LPL Financial settlement, the firm agreed to repurchase from investors certain securities that were sold to them since October, 2006.  LPL will also have to pay civil penalties to the states, which could be as much as a $26 million penalty.

What happened?   State securities regulators have been investigating LPL Financial for years regarding failures to have reasonable policies and procedures.  In the last year, NASAA’s task force has focused on investigating LPL’s procedures to prevent LPL brokers from selling unregistered, non-exempt securities.

The sale of unregistered, non-exempt securities violates most states’ securities law and federal securities laws.  Often those securities do not disclose important information to the prospective buyer, like the riskiness of the investment, lack of liquidity or ability to sell the investment, or true financial history of the investment.  Sellers may get high commissions and other incentives to pitch these products to investors, even if the product is not suitable or in the best interest of that investor.

Under the agreement, LPL will repurchase from investors unregistered, non-exempt securities sold since October 1, 2006 to LPL customers by their broker.  Not only will LPL repurchase, it will pay 3% interest from the date of sale.  Other terms were agreed upon for customers who have since sold or transferred their qualified securities out of their LPL account.

Is this a good deal?  Yes, for many cheated investors, it’s an unusually good deal. NASAA is an association of state securities regulators.  Those state regulators help investors by cracking down on bad broker conduct by national firms like LPL Financial.  The dollars from civil penalties issued by regulators occasionally go back to compensate the victims — but not usually.  The key to this LPL Financial settlement is that the firm agreed to buy back the securities from investors and pay 3% interest.  For many investors, especially those with smaller amounts of affected securities, that’s a very good result for a recovery without private litigation.

However, investors that otherwise qualify for the buy-back may have strong, valid, private claims for relief against LPL Financial that might result in a better outcome.   It depends on the facts, and an experienced securities attorney can help you make that evaluation.

Failure to have reasonable supervisory and compliance procedures, failures to reasonably supervise its brokers, and unlawful broker conduct all are violations of FINRA rules and may state blue sky securities laws.   In some states like Oregon, brokerage firms may have joint and several liability with the bad broker, and the statutory remedy for these violations can be repayment of the original purchase price, plus interest at 9% from date of purchase, less any dividends or money otherwise received from the investment.  It may also include payment of attorney fees.  These are claims that an experienced securities fraud attorney like Darlene Pasieczny can bring on behalf of an investor in FINRA arbitration.

If you are an LPL Financial customer, or customer of any brokerage firm, and you have concerns about what you were sold for your investment portfolio, call us today for a free initial consultation.   Sudden large drops in portfolio value for a moderate or conservative investor, or discovering you cannot easily sell an investment, are some of the Red Flags that you may have securities claims for recoverable losses.  Don’t wait – statute of limitations may apply to set deadlines of when you can file a claim.

If you have concerns about how your money is being handled by your financial professional, or concerns that you or a loved one might be the victim of financial exploitation, call me at 1-800-647-8130. Again, consultations are free, and confidential.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice includes representing investors nationwide in investment disputes through FINRA arbitration.

Down Markets – A Good Time to Look For Red Flags and Recoverable Investment Losses

The news has been full of stories of investment losses. First, it was cryptocurrencies and related investments on a roller coaster ride of valuation. Then, in the last week, the major stock market indices followed… Dow Jones, S&P 500, Nasdaq…

What is a Main Street investor to do?

As a securities attorney representing investors in disputes with the financial industry, down markets mean my phone starts ringing. Investors start to look closely at their portfolios.

Some find surprises. Potential claims against their financial advisor to recover investment losses.

Not every investment loss is a recoverable investment loss – far from it. But, sometimes investment losses are caused because of a financial advisor’s misconduct. Making unsuitable securities recommendations to buy risky investments or allocate a portfolio in a certain way. Failing to follow instructions, negligence, or outright fraud and misrepresentation.

The law provides remedies to investors injured by advisor misconduct. Typically, securities claims are brought by filing a statement of claim in FINRA arbitration. I’ve helped my clients bring securities claims in FINRA arbitration. I help them to navigate mediation and informal settlement discussions. And I have helped them recover millions of dollars, thought to be lost forever due to “bad luck”.

I recently filed some short video clips explaining how an experienced securities attorney like myself can help investors who think they may have a problem, and why investors may be hesitant to seek help and file claims to recover losses.

A down market is a good time to take a hard look at your, or your client’s, portfolio. And ask questions.

Why is the portfolio heavily allocated in one volatile sector, such as oil and gas?

Was that level of risk appropriate for the investor at the time of the recommendation? Why are there so many LP and LLC private placement interests in the portfolio? Can those interests be sold? And why are my investment losses in this down market so much more than my friend’s losses, when we have similar financial goals and risk tolerances? These and other red flags may be signs of investment fraud.

If you think you may be the victim of investment abuse, call me toll free at 1-800-647-8130 for a free, confidential initial consultation. I represent investors in FINRA arbtiration nationwide who have investment losses caused by the conduct of a financial professional or a defective investment product. I also represent parties in trust and estate disputes where a fiduciary has breached their duties and money is recoverable to the estate, trust, or beneficiary.

The Investor Defenders at Samuels Yoelin Kantor LLP help investors get their money back from brokerage fraud, fraudulent investments, elder financial abuse, and other situations. Our specialized investment litigation practice combines familiarity with complex financial modeling, experience with specialized FINRA arbitration rules and securities laws, and empathy for our clients whose investment losses have become personal.

If you have concerns about how your money is being handled by your financial professional, or concerns that you or a loved one might be the victim of financial exploitation, call me at 1-800-647-8130. Again, consultations are free, and confidential.

Darlene Pasieczny’s practice at Samuels Yoelin Kantor LLP focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice includes representing investors nationwide in investment disputes through FINRA arbitration.