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 […]Read More
Current cryptocurrency regulation and cryptocurrency investment regulation can be summed up in one phrase: Regulation by Enforcement. I moderated a great panel presentation this weekend on Cryptocurrency Investments, Supervision and Securities Regulation at PIABA’s mid-year CLE event in Los Angeles on May 5, 2018. We discussed the current state of regulation as well as the […]Read More
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, […]Read More
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.Read More
Ten Red Flags of Investment Fraud We’ve updated our list of ten red flags that investors should be aware of: danger signs that point to potential mismanagement of an account or investment fraud by a financial advisor. These red flags are useful as you evaluate your own investments, review the investments of an elderly relative, […]Read More
On February 5, 2018, a new FINRA rule geared towards preventing financial exploitation of seniors – also called elder financial abuse – goes into effect. This is new Rule 2165, which creates a limited safe harbor for brokers to put a temporary hold on certain disbursement requests from a brokerage account.
The rule “permits members to place temporary holds on disbursements of funds or securities from the accounts of specified customers where there is a reasonable belief of financial exploitation of these customers.” The new rule also amends existing FINRA Rule 4512, to require members to take reasonable efforts to have the customer identify the name of a trusted contact person as part of gathering customer account information. The broker may contact that person if there is a suspicious request for a disbursement of funds. The broker may also contact that person to confirm the customer’s contact information, health status, or identify of any legal guardian, executor, trustee, or holder of a power of attorney.Read More
This past Thursday, the same day I posted about a recent FINRA Investor Alert regarding cryptocurrency, there was a new press release from the North American Securities Administrators Association (NASAA) with further guidance on the same topic. NASAA’s analysis and warning amounts to this: Initial Coin Offerings (“ICOs”), and all other investment products related to cryptocurrency or the blockchain, pose a threat to investors.
“A NASAA survey of state and provincial securities regulators shows 94 percent believe there is a ‘high risk of fraud’ involving cryptocurrencies. Regulators also were unanimous in their view that more regulation is needed for cryptocurrency to provide greater investor protection.”Read More
FINRA recently released an Investor Alert on cryptocurrency scams. Investors should be wary of jumping into this “hot,” volatile sector, and do their research before handing over their money to a potential fraudster, or, for a risky investment that they don’t understand.
In the last quarter, cryptocurrencies such as Bitcoin and Ripple have received a fresh burst of press attention. This includes reporting on massive price swings up and down, and stories of overnight millionaires. According to the media, a Welsh man who spilled lemonade on his laptop in 2013 and absentmindedly threw the hard drive away now wants to mine the local dump for the hard drive. Why? It contained the key to access his lost Bitcoin fortune said to be worth $100 million — but only if he finds it and if the drive is still operational. It’s a good metaphor for Wild West, gold rush atmosphere of the whole cryptocurrency hype.Read More
On December 21, 2017, the Financial Industry Regulatory Authority (FINRA) announced it had fined brokerage firm Raymond James Financial Services, Inc. $2 million for significant supervisory failures in reviewing email communications. FINRA found that, over a nine-year period, Raymond James did not have a reasonably designed supervisory system and procedures for reviewing email communications.
Why is email review important? Under FINRA rules, brokerage firms must reasonably supervise all electronic communications technology used by a firm and its brokers to conduct firm business. Many firms used a risk-based approach to supervision, automatically searching for key words and phrases in emails. This review is important for firms to catch bad conduct, such a broker involved in unapproved “outside business activities,” or conducting securities transactions that are not approved by the firm, also known as “selling away.”Read More
On November 8, 2017, the Financial Industry Regulatory Authority (FINRA) announced that a broker named Hank Mark Werner of upstate New York had been barred from the securities industry. The headline: “FINRA Hearing Panel Bars Broker for Defrauding Elderly, Blind Customer”.
The pattern of this behavior is outrageous but not all that unusual. It makes a good example of how financial professionals fail their clients.
According to the FINRA news release, Mr. Werner served as the licensed broker for an elderly couple since 1995. The husband died in 2012. Mr. Werner made some 700 trades on “behalf” of his client, a sightless 77-year old recently widowed woman in poor health between October 2012 and December 2015. He ultimately collected $210,000 in commissions. The panel’s decision includes an order of restitution to the widow, a fine, Mr. Werner’s banishment from the industry, and a further fine and censure for his employer – Legend Securities, brokerage firm expelled from the securities industry as of April, 2017.Read More