August 27, 2014

Citigroup Global Markets Fined $1.85M By FINRA, Must Pay $638K Restitution Over Non-Convertible Preferred Securities Transaction Valuations

The Financial Industry Regulatory Authority says that Citigroup Global Markets Inc. (C) will pay a fine of $1.85 million for not providing best execution in about 22,000 customer transactions of non-convertible preferred securities, as well as for supervisory deficiencies that went on for over three years. Affected customers are to get over $638,000 plus interest.

A firm and its registered persons have to exercise reasonable diligence to make sure that the sale/buying price the customer pays is the most favorable one under market conditions at that time. FINRA says that instead a Citigroup trading desk used a pricing methodology for the securities that failed to properly factor in the securities’ National Best Bid and Offer. Because of this, contends the self-regulatory organization, over 14,800 customer transactions were priced inferior to the NBBO. The SRO also claims that because Citigroup’s BondsDirect system for order execution used a faulty pricing logic, over 7,200 customers transactions were priced at less than NBBO.

FINRA says that Citigroup’s written supervisory procedures and supervisory system related to best execution in these securities were lacking. It claims that the firm did not review customer transactions for the securities at issue, which were either executed manually by the trading desk or on BondsDirect. Such an assessment could have ensured compliance with Citigroup’s best execution duties. (FINRA noted that it had sent the firm inquiry letters about the reviews.)

Citigroup is consenting to the entry of the SRO’s findings. It isn’t, however, denying or agreeing with FINRA’s claims.

FINRA Fines Citigroup Global Markets Inc. $1.85 Million and Orders Restitution of $638,000 for Best Execution and Supervisory Violations in Non-Convertible Preferred Securities Transactions, FINRA, August 26, 2014

Citigroup to Pay $2.5 Million for Pricing Flaws of Markets Unit, The Wall Street Journal, August 26, 2014


More Blog Posts:
Citigroup’s LavaFlow to Pay $5M to SEC For Not Protecting Subscriber Data in ATS, Stockbroker Fraud Blog, July 28, 2014

Judge Rakoff Approves Citigroup’s $285M Mortgage Securities Fraud Deal with the SEC, Institutional Investor Securities Blog, August 5, 2014

Citigroup Settles Mortgage-Backed Securities Probe with DOJ for $7 Billion, Institutional Investor Securities Blog, July 14, 2014

August 22, 2014

Securities Regulations News: SEC Looks to Delay Principal Trading Rules, FINRA Adds More Time to REIT Price Changes and 2nd Circuit Says Dodd-Frank’s Whistleblower Protections Don’t Apply Overseas

SEC Wants To Extend Temporary Rule Letting Dually-Registered Advisers Get Principal Trading Consent

For the third time in four years, The Securities and Exchange Commission wants to extend a temporary rule that makes it easier for investment advisers that are also registered as brokers to sell from the proprietary accounts of their firms. The regulator issued for comment its proposal that would move the interim’s rule expiration date to the end of 2016 instead of the end of 2014.

Under the temporary rule, dually registered advisers can either get verbal consent for principal trades on a transaction basis or give written prospective disclosure and authorization, in addition to yearly reports to the clients. With principal trades, a brokerage firm uses its own securities in the transaction.

The Investment Advisers Act of 1940 mandates that advisers get written disclosure and consent prior to every principal trade. This is supposed to prevent possible conflicts of interest when a firm trades from its proprietary account. By extending the interim rule, the regulator wants more time to think about whether there should be a separate rule that would enhance the standards of brokers when it comes to offering investment advice.


FINRA Gives SEC More Time to Act On REIT Price Notification Rule
The Financial Industry Regulatory has extended the deadline for when the SEC must act on its proposed change to Rule 2340, about real estate investment trust price notifications, to until October 17. This is the second extension the self-regulatory organization has given to the Commission over this matter this year.

Last month, FINRA requested that the SEC allow independent brokerage-firms and nontraded real estate investment trust sponsors 18 months to get used to new guidelines that would require them to provide investors with a better idea of the costs involved in buying nontraded REIT shares and other direct placement programs/private placements.

Under the proposed rule change, which would apply to the account statements of brokerage firm clients, the per-share value of a nontraded REIT would not longer be listed at the common price of $10. Instead, the various commissions and fees that dealer mangers and brokers get would have to be factored. This would lower the amount of each private placement’s share price on an account statement. If the SEC decides to follow FINRA’s recommendation, investors with illiquid investments won't see this information on their account statements until April 2016.


Appeals Court Agrees that Dodd-Frank’s Anti-Retaliation Provision Only Apply Domestically
The US Court of Appeals 2nd Circuit held that Dodd-Frank’s anti-retaliation provisions do not apply overseas. The ruling upholds a lower-court decision that granted Siemens' motion to dismiss a lawsuit brought by a former compliance officer at its China offices. The ex-employee, Meng-Lin Liu, said he was retaliated against after reporting alleged wrongdoing at the company.

Under the 2010 Dodd-Frank Act, companies are not allowed to take action against certain whistleblowers. However, the whistleblower provisions don’t stipulate whether these protections extend abroad.

Citing a U.S. Supreme Court ruling, the appeals court affirmed that they only apply in the United States. It noted that Liu, his employer, and the entities involved in any of the alleged acts were foreigners located overseas and that these actions would have occurred outside the country.

Liu turned in a whistleblower tip to the SEC after leaving the company. Like the district court, however, the Second Circuit did not delve into whether or not Liu's failure to qualify for whistleblower protection was because he didn't file this information with the Commission until after he was let go by Siemens China.

Finra tacks on more time to REIT pricing change, Investment News, August 14, 2014

SEC seeks to delay principal trading rule for two years, MorningStar, August 13, 2014

Ruling Leaves Cloud on Whistleblowers, The Wall Street Journal, August 18, 2014

FINRA Rules


More Blog Posts:
SEC Examines Municipal Advisers and Alternative Mutual Funds, Reviews “Wrap-Fee” Accounts, Stockbroker Fraud Blog, August 20, 2014

FINRA Investor Alert Warns About Scams Touting Ebola Cure and Other Viral Disease Stock Schemes
, Stockbroker Fraud Blog, August 19, 2014

Lehman Brothers' Unsecured Creditors to Get $4.6B Payout, Institutional Investor Securities Blog, August 21, 2014

August 19, 2014

FINRA Investor Alert Warns About Scams Touting Ebola Cure and Other Viral Disease Stock Schemes

The Financial Industry Regulatory Authority has put out an investor alert warning against buying stocks in companies claiming to combat viral diseases. The self-regulatory organization says it knows of several possible schemes involving stock promotions employing tactics such as pump-and-dump scams to inflate share prices. The scammers will then sell their shares at a profit while leaving investors with shares that have lost their value.

Intensified news coverage of the recent Ebola and Middle East Respiratory Syndrome outbreak will likely have attracted the attention of stock scammers wanting to take advantage of people’s fears. To avoid falling victim to a viral disease stock scam, FINRA is offering several tips, including:

• Be wary of promotional materials, correspondence, and press releases from senders you don’t know. Watch out for communications that say little about the risks involved while only touting the positives. Getting a barrage of information about the same stock opportunities can also be a red flag.

• Make sure to know who is behind a company you are thinking of investing in. Do your research. Think twice if company officials have past criminal records or you hear anything negative in the news. Be on the look out for fake business addresses and phone numbers.

• A lot of stock pump-and-dump scams don’t trade on the NYSE or other registered national securities exchanges. Instead, you can find them on OTC quotations platforms or alternative trading systems.

• Find out whether the company submitted an SEC filing. Compare the information there with what’s provided in promotional materials and other communications you’ve received. Watch out for solicitations to get you to invest in products that are still being developed or if there are losses on balance sheets.

• Watch out if a company keeps changing its name or business focus.

• Make sure you read the fine print and be wary when name-dropping is used to gain investor confidence or boost legitimacy.

Shepherd Smith Edwards and Kantas, LTD LLP is a securities fraud law firm. Contact our fraud lawyers today to request your free case consultation.

Viral Disease Stock Scams: Don’t Let Them Infect Your Portfolio, FINRA

Investment scammers busy pumping Ebola stocks amid panic, NY Post, August 14, 2014


More Blog Posts:
SEC Files Charges in $4.5M Houston-Based Pump-and-Dump Scam, Stockbroker Fraud Blog, August 18, 2014

SEC Charges Linkbrokers Derivatives in $18M Securities Fraud, Institutional Investor Securities Blog, August 18, 2014

UBS Wealth, OppenheimerFunds Take Financial Hit From Puerto Rico Muni Bonds, Stockbroker Fraud Blog, August 15, 2014

July 31, 2014

SEC Signs Off On FINRA Rule Restricting Expungement Of Customer Complaints

The U.S. Securities and Exchange Commission (“SEC”) has approved a Financial Industry Regulatory Authority (“FINRA”) rule that could make it tougher for brokers to expunge customer complaints from their records in settled arbitration cases. Rule 2081 bars brokers from making settlements with customers contingent upon the customer’s consent to not oppose the expungement of the dispute from the public record of the broker.

A record of arbitration complaints filed against brokers is kept as a part of the CRD system. The CRD system contains data about registered representatives and members, including their registration, employment, and personal histories. It also includes disclosure information pertaining to civil judiciary, disciplinary, and regulatory actions, criminal matters, and data about customer disputes and complaints.

The public can access this data through FINRA’s BrokerCheck website. Brokers can have a customer dispute erased from the CRD system and BrokerCheck only through a court order that confirms there has been an arbitration award that recommends such relief.

According to Investment News, a Public Investors Arbitration Bar Association-released study demonstrated that from 2007 to 2009, expungement requests were approved in 89% of settled cases resulting in settlements or awards. From May 2009 through 2011 that figure rose to 96.9%.

Arbitrators are told to inquire as to whether expungement was part of the terms of a settlement. Usually, when such a condition exists between parties it is never put in writing.

The purpose of the new FINRA rule is to make sure that full and reliable customer dispute data remains available to the public, brokerage firms, and regulators. Still, the SEC feels that there is more the self-regulatory organization should do.

In addition to approving the rule change, the SEC is calling on the SRO to review its expungement procedures and rules and figure out whether additional rulemaking is needed to make sure that expungement only occurs in exceptional situations.

Our FINRA arbitration lawyers represent investors in recouping their losses. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

SEC approves Finra rule limiting expungement, InvestmentNews, July 23, 2014

SEC Approves FINRA Rule to Prohibit Conditioning Settlements on Expungement, FINRA, July 23, 2014

Public Investors Arbitration Bar Association

More Blog Posts:
FINRA Sees 10% Rise in Arbitration Cases, Puerto Rico Bond Claims A Factor, Stockbroker Fraud Blog, April 27, 2014

FINRA Seeks to Limit Definition of Public Arbitrator, Stockbroker Fraud Blog, February 11, 2014

Lawyers, Investor Advocates Want to Know More About SEC Supervision Of FINRA’s Arbitrator Selections, Institutional Investor Securities Blog, December 2, 2013

July 17, 2014

FINRA Wants To Delay Implementing Rule Impacting Nontraded REIT Customers' Statements

The Financial Industry Regulatory Authority wants the Securities and Exchange Commission to grant a delay in the implementation of proposed changes to rule 2340, which impacts customer account statements. The self-regulatory organization had originally asked for the modifications to go into effect six months after the SEC approves the rule change. Now, FINRA wants to give nontraded REIT sponsors and brokerage firms 18 months to adjust to the revised guidelines.

Nontraded REITs are currently not required to show an estimated per-share valuation until 18 months after the sponsors cease to raise funds. Under the proposed rule change, broker-dealer client account statements would eliminate the existing practice of listing at $10 the value, for every share, of a nontraded REIT. This is usually the price that registered representatives sell them at.

The rule change would factor the different commissions and fees that dealer managers and brokers get. It would lower the price per share for every private placement or nontraded REIT found on the account statement of a customer.

Also, trusts would have to show what the valuation is per-share within three to six months. At that point investors would see a below $10/share valuation.

Also, broker-dealer and representative commissions would be able to subtract 12% for the original investment, as well as offering and organizational costs, off a client’s original investment so that an REIT’s estimated sold value would be reduced to $8.80/share price.

The rule that FINRA wants to implement provides two methodologies for broker-dealers to apply after an estimated value is considered reliable: The first method is the independent valuation and can be used at any time. The net investment methodology may be applied for up to two years under certain conditions.

Investors of non-traded real estate investment trusts often find their original investment eroded when the real estate investment trusts give back capital as distributions and dividends to investors. The proposed rule would give investors a better understanding of the costs in buying nontraded REITS shares.

Our non-traded REIT lawyers represent investors who have suffered losses in real estate investment trusts and non-traded REITs that were caused by securities fraud, including the inappropriate solicitation and marketing of these investments. Maybe your broker did not apprise you of the risks or costs involved. Or, perhaps they promoted REITs or Nontraded REITs to you as suitable for your investment goals even though your portfolio was never going to be able to handle the risks.

At Shepherd Smith Edwards and Kantas, LTD LLP, we help investors recoup their REIT fraud losses. Contact our real estate investment trust firm today and ask for you free case consultation. We have helped thousands of investors get their money back.

Finra asks for delay in implementing rule affecting nontraded REIT customer statements, Investment News, July 15, 2015

FINRA Rules


More Blog Posts:
Natural Blue Resources Inc. & Microcap Stock Scammers Accused of Hiding Previous Violations, Stockbroker Fraud Blog, July 16, 2014

FINRA May Expel Ex-Broker For $6M Hedge Fund, Stockbroker Fraud Blog, July 15, 2014

Barclays and Deutsche Bank Under Scrutiny Over Barrier Options Transactions, Institutional Investor Securities Blog, July 17, 2014

July 15, 2014

FINRA May Expel Ex-Broker For $6M Hedge Fund

Dean Mustaphalli, an ex-Sterne Agee Financial Services Inc. broker, could be barred from the industry over allegations that he ran a $6 million hedge fund on the side. According to the Financial Industry Regulatory Authority Inc., Mustaphalli founded and got commissions from Mustaphalli Capital Partners in 2011 but did not tell his brokerage-firm.

Already, Mustaphalli has been named in at least two arbitration claims. He ran the hedge fund through Mustaphalli Advisory Group. It is not known time whether any of the 25 investors he solicited were Sterne Agee clients. Over a four-month period, he was paid about $41,800 in management fees.

Mustaphalli was fired from Sterne Agee in 2011. After he was let go, he purportedly kept soliciting clients for his hedge fund through the investment adviser.

FINRA rule 3040 lets brokers run hedge funds but this must be completely disclosed, approved by, and overseen by the member firm. If a FINRA hearing panel discovers that Mustaphalli withheld information he could also be subject to action for not making sure the hedge fund was properly disclosed.

The self-regulatory organization says that Mustaphalli failed to provide the documents it asked for that would let the regulator know the identities of the hedge fund clients, as well as bank account statements documenting the funds moving in and out of the hedge fund.

Mustaphalli is also under investigation by FINRA for allegedly making variable annuities transactions that were not suitable when he worked at Citigroup Global Markets Inc. (C) He denies those claims.

If you suspect your losses are because of hedge fund fraud, contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Former Sterne Agee broker accused of running $6M hedge fund side business, July 14, 2014

Ex-Sterne Agee broker faces expulsion over $6 million hedge fund, Investment News, July 11, 2014

Conduct Rules, FINRA

More Blog Posts:
SEC Accuses California School District of Misleading Municipal Bond Investors, Stockbroker Blog Fraud, July 11, 2014

SEC Stops Fraudulent Bond Offering by Chicago Suburb, Institutional Investor Securities Blog, June 25, 2014

NY Hedge Fund Adviser Faces SEC Charges Over Conflicted Transactions and Whistleblower Retaliation, Institutional Investor Securities Blog, June 16, 2014

June 7, 2014

FINRA Headlines: SRO Fines Goldman Sachs, Merrill Lynch, and Barclays Capital $1M Each & Makes Dark Pool Data Available

FINRA Fines Merrill Lynch, Goldman, and Barclays Capital $1M Each Over Blue Sheet Data

The Financial Industry Regulatory Authority has issued a censure that fines Goldman Sachs & Co. (GS), Merrill Lynch, Pierce Fenner & Smith Inc., and Barclays Capital Inc. $1 million each. The firms are accused of not submitting accurate and complete data about trades conducted by them and their customers to the SRO and other regulators. This information is known as “blue sheet” data. Firms are legally required to give regulators this information upon request.

Blue sheets give regulators specific information about trades, including the name of a security, the price, the day it was traded, who was involved, and the size of transaction. This information is helpful to identify anomalies in trading and look into possible market manipulations.

The three firms, which all have a prior history of submitting inaccurate blue sheet data, settled the charges without denying or admitting to the allegations. Meantime, FINRA has also put out a complaint against Wedbush Inc. also over submitting inaccurate blue sheet information. That case, however, has not been adjudicated yet.


FINRA Gives the Public Access to Dark Pool Data
To enhance market transparency and boost investor confidence, this week FINRA started providing data about the activity levels in all of the different alternative trading systems. This includes information pertaining to dark pools.

Currently, ATSs are involved in a significant chunk of OTC trading in exchange-listed equities located in the US. Although trades in ATSs have been available in real time to professionals and investors via securities information processors, they are not typically attributed to specific dark pools.

The newly available data should allow the public to see how many shares were traded each week in each dark pool. The information can be found on FINRA’s website and is free.

Meantime, as our stockbroker fraud law firm reported in another blog post, the Securities and Exchange Commission is also seeking to make dark pool venues more transparent.

Shepherd Smith Edwards and Kantas, LTD LLP represents investors in arbitration and in court. Contact us to find out whether you have reason to pursue a securities claim. Your consultation with one of our FINRA arbitration lawyers is free.


FINRA Fines Barclays Capital, Goldman Sachs and Merrill Lynch $1 Million Each for Submitting Inaccurate Blue Sheet Data, FINRA, June 4, 2014

FINRA Makes Dark Pool Data Available Free to the Investing Public, FINRA, June 2, 2014

User Agreement, ATS Transparency Data, FINRA


More Blog Posts:
Bank of America Could Settle Mortgage Probes for $12B, Institutional Investor Securities Blog, June 7, 2014

SEC Charges Chicago Investment Advisory Founder With Real Estate Investment Fraud
, Institutional Investor Securities Blog, June 11, 2014

In Alleged $400M Texas Securities Fraud, Medical Device Maker Pays Over $30M Settlement, Stockbroker Fraud Blog, January 13, 2014

May 5, 2014

FINRA Panel Tells Ameriprise to Pay Elderly Couple $1.7M Over Unsuitable Real Estate Investments

A Financial Industry Arbitration panel says that Ameriprise Financial Services Inc. (AMP) must pay $1.17M to two senior investors for getting them involved in investments that failed. The panel said that the financial firm acted inappropriately when it advised Albertus Niehuis Jr., 82, and his wife Andrea, to put $1.03M into high-risk tenant-in-common investments involving hotels and office complexes six years ago. They are retired school teachers.

One of the investments failed. The other two lost significant value. Despite the ruling, the financial firm insists that it gave the Niehuises the appropriate investment advice and it stands behind the recommendations.

In 2012, ThinkAdvisor.com said that the number of senior investors is expected to reach 89 million in 2050. Currently, there are close to 40 million Americans belonging to the age 65 and over group. Unfortunately, elder financial fraud continues to be a serious problem.

Just recently, broker Michael Zuno Zuniga received a 5-year prison term and was told to pay $1.2 million for taking part in a Ponzi scam that targeted seniors living in the Los Angeles, California area. He was charged with 57 felony counts and accused of bilking at least 18 investors, most of them Latinos, of about $1.5 million. Zuniga reportedly solicited his victims in their homes.

Financial firms and their representatives know that older investors sometimes can’t afford to take on as much risk as younger investors. It is the broker’s job to make sure that they make the appropriate investment recommendations to protect their clients’ money.

Many elderly investors will not be bringing in more income and they will need the money they do have to take care of them for the rest of their lives. Huge investment losses can be devastating, possibly making it hard for them to get the proper medical and nursing care they might need later in life.

At Shepherd Smith Edwards and Kantas, LTD LLP, we are here to help senior investors get their fraud losses back. Contact our senior investor fraud lawyers today.

Finra panel orders Ameriprise to pay couple $1.17 million, InvestmentNews, May 5, 2014

Best Practices for Working with Senior Investors, Think Advisor

Broker sentenced for $1.5 million Ponzi scam targeting Latino seniors, IFAWebnews.com, April 29, 2014


More Blog Posts:
SEC Files Fraud Charges Against American Pension Services and Its Founder Over $22M Investor Losses, Stockbroker Fraud Blog, April 30, 2014

Elder Financial Fraud: One Out of Five Seniors Victimized, Reports WSJ, Stockbroker Fraud Blog, January 20, 2014

The Brokerage Industry Responds to FINRA’s Broker Compensation Proposal
, Institutional Investor Securities Blog, April 4, 2014

April 27, 2014

FINRA Sees 10% Rise in Arbitration Cases, Puerto Rico Bond Claims A Factor

According to statistics put together by the Financial Industry Regulatory Authority, the number of securities arbitration cases brought by the self-regulatory agency is on target to exceed last year’s total. A likely contributor to the increase can be attributed to the numerous Puerto Rico municipal bond cases already filed by investors who sustained huge losses. More of these are inevitable, especially as FINRA just increased its arbitrator pool to deal with cases involving muni bonds from the US territory.

The broker-dealer regulator said that during this first quarter alone, 1,011 FINRA arbitration cases were submitted—a definite increase from the 919 securities arbitration claims filed during 2013’s first three months. However, the number of arbitration cases that were closed during this first quarter is less than in two years prior, with just 946 resolved. Compare that to the over 4,400 and 4,800 cases in 2013 and 2012, respectively.

That said, 5O% of arbitration cases decided during this initial quarter rendered damage awards, which is more than in the last two years. The most common claim in FINRA arbitration cases filed in 2014 so far is breach of fiduciary duty. Negligence, failure to supervise, and breach of contract are the other leading claims.

FINRA Arbitration
Arbitration is another means to resolving disputes as opposed to mediation and arbitration. A FINRA panel of arbitrators presides over the cases, studies the evidence and issues a ruling. The decision is final and binding unless a successful challenge is made in court within the statute of limitations. While outcomes are generally not made known to the public, if an award is issued then the SRO will publish this information.

Our FINRA arbitration law firm works with individual investors and institutional investors. We are here to help investors get their losses back. Shepherd Smith Edwards and Kantas, Ltd. LLP would like to offer you a free case assessment to find out whether you have reason to file an arbitration claim.

Finra sees uptick in arbitration cases filed in first quarter, InvestmentNews, April 22, 2014

Arbitration Overview, FINRA


More Blog Posts:
FINRA Seeks to Limit Definition of Public Arbitrator, Stockbroker Fraud Blog, February 11, 2014

FINRA Doesn’t Want Oversight Over Financial Advisers, Says CEO Ketchum, Stockbroker Fraud Blog, April 12, 2014

Lawyers, Investor Advocates Want to Know More About SEC Supervision Of FINRA’s Arbitrator Selections, Institutional Investor Securities Blog, December 2, 2013

April 12, 2014

FINRA Doesn’t Want Oversight Over Financial Advisers, Says CEO Ketchum

According to Financial Industry Regulatory Authority CEO Richard G. Ketchum, the regulator no longer wants to be given oversight over financial advisers. Speaking to The Wall Street Journal, Ketchum said the self-regulatory agency had done all it could to be granted authority over investment advisers and has decided to stop with additional attempts.

FINRA currently oversees brokers. Meantime, the Securities and Exchange Commission and the states oversee registered investment advisers. The SEC had been exploring having FINRA or another agency police RIAs instead. However, the majority of investment advisers were against such a move because of the way FINRA handles enforcement. They don’t think the regulator understands the way investment advisers operated.

Ketchum is now saying that Congress should give the SEC the resources it needs to enhance its examination program of advisers. The Commission has been asking for more money because it can only afford to examine investment advisor firms about once a decade, which isn’t much oversight at all.

Ketchum also said that he approves of the way investment advisers, like brokers, must now uphold fiduciary standards that mandate that they always act in the best interests of a client. However, it is only brokers who need to ensure that the investment strategies and products they recommend are suitable for a customer.

Meantime, reports InvestmentNews, a five-year bull market is causing advisers to experience the highest levels of compensation and assets under management in seven years. A study just released by Fidelity Investments reports that in the last year approximately 95% of advisers saw their business grow. Also, average compensation was at about $24,000 and average assets under management was at around $60 million. However, many advisory firms are finding it hard to draw in young clients, which could slow long-term growth.

Our securities lawyers represent investors that have lost money because of investment adviser fraud and other forms of financial fraud. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Financial Industry Regulatory Authority

Finra Backs Off From Expanding Oversight, The Wall Street Journal, April 10, 2014

Advisers' business booming, but dark clouds looming, Investment News, April 10, 2014


More Blog Posts:
SEC Says Investment Advisors Can Publish Third-Party Endorsements Online, Stockbroker Fraud Blog, April 1, 2014

SEC Reveals Plans to Examine Never-Before-Inspected RIAs, Stockbroker Fraud Blog, February 24, 2014

SEC Sanctions Three Investment Advisory Firms for Custody Rule Violations, Institutional Investor Securities Blog, October 30, 2014

March 27, 2014

Puerto Rico Bonds Are at Record Low Prices After FINRA Announces It Is Looking At Transactions

According to Bloomberg, Puerto Rico bonds that were issued this month are now at record low prices after the Financial Industry Regulatory Authority announced that it is looking at transactions involving the new securities. The US territory sold $3.5 billion of general obligation bonds, which is the largest junk bond offering in the history of the municipal market.

According to numerous financial news sources, the offering documents for Puerto Rico’s newly issued bonds stated there would be a $100,000 minimum order allowed so that the purchasers of the junk bonds would be limited largely to institutional buyers. Their prospectus says that bonds were to be issued at a $100,000 minimum and “integral multiples of $500,000 in excess thereof” unless Standard & Poor’s, Moody’s Investors Services, and Fitch Ratings raise Puerto Rico’s credit to investment grade. All three credit ratings agencies recently declared the US territory’s credit ratings “junk.”

Nevertheless, many transactions under the $100,000 amount have been reported, despite the lack of an upgrade in the bonds. As a result, scores of Puerto Rico bond transactions issued this month were cancelled. There is also data indicating that some brokers are trading under the $1,000 minimum established by the prospectus.

Additionally, BondBuyer.com is reporting that not only were there deals that violated the $100,000 minimum denomination requirement cancelled but they have been modified as if they never happened and/or were removed from EMMA, which is the Electronic Municipal Market Access system. This, say some, is a failure to make sure that retail investors and the public are being provided with transparency that they are owed. BondBuyer.com noted that as of the end of March 24, just 15 of the 70 illegal Puerto Rico bond trades that it discovered were still there.

While Puerto Rico municipal bonds have been popular with some investors because of the favored tax status they receive, they have sustained huge losses in the last six months. Puerto Rico is now more than $70 million in debt and continues to be on negative credit watch. Nevertheless, Puerto Rican brokerage firms, such as Santander Securities, Popular Securities, UBS (UBS) and Merrill Lynch (MER), as well as many US based brokerage firms, have heavily pushed Puerto Rican debt.

If you invested in Puerto Rico bonds and you sustained losses, you may have grounds for a Puerto Rico muni bond fraud case. Contact Shepherd Smith Edwards and Kantas, LDT LLP today.

Scores of Puerto Rico Trades Sub-$100,000 Voided by Dealers, Bloomberg, March 26, 2014

Problem Puerto Rico Bond Trades Erased, Survey Shows More Troubled Sales, The Bond Buyer, March 25, 2014

Finra Examining Trading in Puerto Rico Bonds, The Wall Street Journal, March 21, 2014

Electronic Municipal Market Access (EMMA), Municipal Securities Rulemaking Board


More Blog Posts:
Puerto Rico Senate Votes to Sell $3.5B in Bonds, Stockbroker Fraud Blog, February 28, 2014

Hedge Funds Interested in Upcoming Puerto Rico Bond Offering Want The Territory to Borrow Money To Last Two Years, Stockbroker Fraud Blog, February 17, 2014

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt, Institutional Investor Securities Blog, November 15, 2013

March 17, 2014

FINRA Orders Securities America and Triad Advisers to Pay $1.2M Over Reporting Violations

The Financial Industry Regulatory Authority is fining Securities America and Triad Advisors $625,000 and $650,000, respectively, for not properly supervising the way consolidated reporting systems were used. Triad must also pay $375,00 in restitution. Even though they are settling, the two firms are not denying or admitting to wrongdoing.

The self-regulatory organization said this inadequate supervision led to statements containing inaccurate valuations that were sent to customers. The two firms are also accused of disobeying securities laws by not keeping appropriate consolidated reports.

A consolidated report is a document that includes information about the bulk of a customer’s financial holdings. The report is a supplement to official account statements.

According to FINRA, while Securities America and Triad Advisors had a consolidated reporting system that allowed representative to generate these reports, for over two years they did not supervise the hundreds of brokers who were authorized to do this. This permitted the generation and dissemination to customers consolidated reports that were inaccurate and false, and contained inflated investment values, fictitious assets, and other inaccuracies. As FINRA Enforcement Chief and EVP Brad Bennett has noted, consolidated reports can be used to hide theft and fraud without proper supervision.

At Shepherd Smith Edwards and Kantas, LTD LLP reports, our securities fraud lawyers are here to help investors that have suffered losses because of broker or firm negligence or misconduct to get their money back. Contact our securities law firm today.

Finra Fines Triad Advisors, Securities America for Inaccurate Consolidated Reports, The Wall Street Journal, March 12, 2014

FINRA Fines Triad Advisors and Securities America a Total of $1.2 Million for Consolidated Reporting Violations, FINRA, March 12, 2014

Triad Advisors Action (PDF)

Securities America Question (PDF)


More Blog Posts:
Securities America, Ameriprise, Among Independent Broker-Dealers Charged $10.75M by Massachusetts for Nontraded REIT Sales, Stockbroker Fraud Blog, September 4, 2013

Ameriprise Financial, Securities America, & Three Other Brokerage Firms Reach $9.6M Non-Traded REIT Securities Settlement with Massachusetts Financial Regulator, Stockbroker Fraud Blog, May 22, 2013

Ex-Goldman Trader Tourre Must Pay $825M in Securities Fraud Involving CDO Abacus 2007-AC1, Institutional Investor Securities Blog, March 14, 2014

March 5, 2014

Fines for FINRA Sanctions Went Down 27%, Reports New Analysis

According to a review of Financial Industry Regulatory Authority actions in 2013, fines imposed by the self-regulatory organization dropped by 27% compared to the year before, even though the number of cases during both were almost identical. Sutherland Asbill & Brennan LLP, which completed the review, said that last year FINRA imposed $57 million of fines, compared to $77 million in 2012.

The fine total from 2013 was the lowest imposed since 2010, when the regulator fined member firms and associated individuals $45 million. Also, even though the fines went down, there was 1% less disciplinary actions brought by FINRA at 1,535 actions, compared to the 1,541 submitted made in 2012. Another decline occurred in the number of firms that FINRA expelled—24 in 2013 and 30 in 2012. That said, the SRO did suspend more individuals—670 last year, up from 549 the year before—and bar more persons from 294 in to 429 last year, which is a 46% increase.

Sutherland’s believes the fines went down because many of the cases generated by the financial crisis have been tackled. This means that even with so many cases, these aren’t necessarily resulting in fees that are as high.

The firm’s report also identified the top enforcement issues of 2013 for FINRA, including:

1) Electronic communications: Includes failure to review, supervise, and retain emails and other e-communications. This issue resulted in the most fines imposed at $15 million in over 60 cases.

2) Trade reporting: There were 198 trade reporting cases that generated $12.1 million in fines.

3) Short selling: 40 cases and $7.2 million in fines.

4) Books and records: 95 cases resulting in $7.1 million in fines.

5) Municipal securities: There was a 21% rise in the number of cases brought at 51, up from 42 cases in 2012.

Regarding enforcement trends, suitability was not one of the top enforcement issues with FINRA last year. Sutherland again notes that this may be because the SRO has completed most of its suitability cases stemming from the 2008 economic crisis.

Fines related to advertising also slowed, as did the number cases that rendered “supersized” fines. Another enforcement trend that slowed down was the area of complex products, including cases involving collateralized mortgage obligations, real estate investment trusts, and unit investment trusts.

At Shepherd Smith Edwards and Kantas, LTD LLP, our FINRA arbitration lawyers represent investors wishing to recover their losses. Our securities fraud cases are separate from those brought by regulators and others in the industry.

It is important that you don’t try to pursue your securities claim without experienced legal help, which can increase the chances of you getting back your losses.

Finra fines, complaints drop as market improves, Investment News, February 26, 2014

Annual Sutherland Analysis of FINRA Sanctions Shows 27% Decrease in Fines; Number of Cases Nearly Identical, Marketwatch, February 24, 2014

Financial Industry Regulatory Authority


More Blog Posts:
Ex-Merrill Lynch Adviser, Already Jailed for Massachusetts Securities Fraud, Now Indicted Over Ponzi Scam, Stockbroker Fraud Blog, March 4, 2014

Detroit, MI to Pay UBS and Bank America $85M Over Interest Swaps Settlement, Institutional Investor Securities Blog, March 4, 2014

Puerto Rico Senate Votes to Sell $3.5B in Bonds, Stockbroker Fraud Blog, February 28, 2014

February 25, 2014

Berthel Fisher & Affiliate Fined $775K by FINRA Over Supervisory Failures Involving Non-Traded REITs and Leveraged and Inverse ETFs

Berthel Fisher & Company Financial Services, Inc. and its affiliate, Securities Management & Research, Inc. are going to pay the Financial Industry Regulatory Authority a combined $775,000 for purported supervisory deficiencies related to leveraged and inverse exchange-traded funds and non-traded real estate investment trusts. The firm settled without deny or admitting to the allegations.

FINRA claims that from January 2008 to December 2012 Berthel Fisher had inadequate written procedures and supervisory systems to deal with the sale of alternative investment products, such as managed futures, non-traded REITs, oil and gas programs, managed futures, business development companies, and equipment leasing programs. The SRO says that the brokerage firm’s staff were improperly trained with regard to state suitability standards, and criteria wasn't properly enforced in a number of alternative investment sales because the firm did not figure out the correct concentration levels of certain financial instruments.

FINRA also said that from 4/09 to 4/12, Berthel Fisher lacked a reasonable basis for certain ETF sales, resulting from numerous reasons, including a failure to properly review or research non-traditional ETFs before letting registered representatives make recommendations to customers. Inadequate sales training was not provided and some customers suffered losses because the brokerage firm did not monitor investment holding periods.

Inverse and leveraged ETFs are typically not considered appropriate, for buy-and-hold, low risk customers. They offer greater exposure to market fluctuations and can differ a lot from the benchmark for periods lasting over a day. The SRO notes that Berthel Fisher representatives recommended $49.5 million in nontraditional ETFs to over 1,000 customers. Unfortunately, a number of these products were sold to clients who wanted their investments handled more conservatively

As part of the settlement, Berthel Fisher agreed to retain an independent consultant to enhance supervisory procedures for alternative investment sales. It will also pay almost $13,293 in investor restitution. The broker-dealer no longer has inverse and leveraged ETFs on its platform.

If you suspect you were the victim of securities fraud, contact our Non-traded REIT lawyers or our ETF fraud lawyers today.

FINRA Fines Berthel Fisher and Affiliate, Securities Management & Research, $775,000 for Supervisory Failures Related to Sales of Non-Traded REITs and Leveraged and Inverse ETFs, FINRA, February 24, 2014

Finra fines Berthel Fisher $775,000 for compliance failures, Investment News, February 24, 2014


More Blog Posts:
Foremost Trading LLC Must Pay $400K to CFTC for Supervisory Violations, Stockbroker Fraud Blog, September 12, 2013

SEC Risk Fin Director Wants Public Input About Investor Protection-Related Costs and Benefits, Stockbroker Fraud Blog, June 15, 2013

Lehman Brothers Holdings’ $767M Mortgage Settlement to Freddie Mac is Approved by Judge, Institutional Investor Securities Blog, February 19, 2014

February 11, 2014

FINRA Seeks to Limit Definition of Public Arbitrator

According to Investment News and The Wall Street Journal, sources in the know say that the Financial Industry Regulatory Authority wants to limit how many brokerage industry insiders can act as arbitrators in investor disputes with broker-dealers and brokers. The amendment would keep anyone affiliated with the securities industry, including lawyers and ex-brokers, from representing themselves in the role of public arbitrator. FINRA’s board of directors will decide whether to approve a proposed rule changes on this matter at a meeting this week.

Under the FINRA arbitration system, there are two arbitarator categories: nonpublic and public. Public arbitrators usually don’t have a current insider industry connection with the securities industry. Meantime, arbitrators that are nonpublic can have current ties, even working as a banker or a broker or securities fraud lawyer.

Usually, there are three arbitrators on a panel presiding over an investor-broker dispute. The panel members are selected from a list of arbitrators. Respondents and claimants go through this list to eliminate those they don’t want on the panel.

Currently, the SRO lets industry veterans that haven’t been associated with a broker-dealer in at least five years (and didn’t spend at least 20 decades in the financial services sector) add themselves to the list of public arbitrators. Accountants, lawyers, and others that previously represented brokerage firms but haven’t made $50,000 in yearly revenue from the companies in the last two years were able to do the same. If the proposal passes, however, all these individuals, as would lawyers representing investors in securities lawsuits, would have to list themselves as “nonpublic.”

FINRA reportedly hopes this revised and delineated designation would make panels more neutral. There have been worries that arbitrators with industry connections might find it hard to be impartial.

Our FINRA arbitration law firm represents investors with securities disputes that they wish to resolve before the SRO. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Finra to Limit Use of Arbitrators with Industry Ties, Wall Street Journal, February 11, 2014

Finra moves to tighten public arbitrator definition, Investment News, February 11, 2014

Arbitration and Mediation, FINRA


More Blog Posts:
Lawyers, Investor Advocates Want to Know More About SEC Supervision Of FINRA’s Arbitrator Selections, Institutional Investor Securities Blog, December 2, 2013
FINRA Orders J.P. Turner to Pay $707,559 in Exchange-Traded Fund Restitution to 84 Clients, Stockbroker Fraud Blog, December 10, 2013

FINRA Issues Investor Alert on IRA Rollovers, Stockbroker Fraud Blog, January 31, 2014


January 31, 2014

FINRA Issues Investor Alert on IRA Rollovers

The Financial Industry Regulatory Authority has put out an alert to help investors figure out whether an IRA rollover is the right choice. Gerri Walsh, the self-regulatory organization’s senior VP for Investor Education said that comparing investment choices and costs can prevent “unnecessary cracks” to one’s “nest egg.”

FINRA offers 10 tips when deciding about an IRA Rollover:

• Assess your transfer options: do you keep in an ex-employer’s plan, move assets to a new employer’s plan, roll over plan assets into an IRA, or cash out your balance?

• Consider carefully before opting for an indirect rollover, which come with tax ramifications.

• Be aware of conflicts of interest. Is your financial professional recommending an IRA rollover because he/she will earn a commission?

• Watch out for “No Fee” or “Free” claims: There may be other costs even if not to the IRA rollover, such as administration and account management fees. Make sure you know what is involved.

• Make sure you do look at the different investment options available to you so you can choose the best one for you.

• Make sure to ask your financial/tax professional questions. Don’t be embarrassed if you don’t know or understand something. It is their job to make sure you know what is going on. If you don’t understand the investment, don’t buy it.

• Consider minimizing taxes by rolling assets from a traditional plan to a traditional IRA or a Roth plan to a Roth IRA.

• Know what the fees and expenses are, including sales loads, commissions, investment advisory fees, customer service access fees, etc.

• Look at whether there are tax implications for company stock that is appreciated.

• Know that your age makes a difference. If you leave a job after age 55 but before age 59 ½, you may be able to take penalty-free withdrawals from a plan that is sponsored by an employer. This is not an option until age 59 ½ for withdrawals from an IRA.

Shepherd Smith Edwards and Kantas, LTD LLP is a securities fraud law firm that has helped thousands of customers recoup their losses. Contact one of our FINRA arbitration attorneys today.

Finra cautions investors to be careful with IRA rollovers, notes that adviser fees can hurt returns, Investment News, January 23, 2014

The IRA Rollover: 10 Tips to Making a Sound Decision, FINRA


More Blog Posts:
JP Morgan VP Barred from Securities Industry By FINRA for Insider Trading Scam, Stockbroker Fraud Blog, January 24, 2014

FINRA Arbitration Panel Says Wells Fargo Must Repurchase $94M of Auction-Rate Securities from Investors, Stockbroker Fraud Blog, December 29, 2013

FINRA Considers System That Would ‘Red Flag’ Customer Accounts at Brokerage Firms, Institutional Investor Securities Blog, December 27, 2013

January 25, 2014

JP Morgan VP Barred from Securities Industry By FINRA for Insider Trading Scam

The Financial Industry Regulatory Authority is barring J.P. Morgan Securities, LLC (JPM) vice president David Michael Gutman and ex-Meyers Associates LP Christopher John Tyndall from the securities industry for their alleged involvement in an insider trading scheme. According to the self-regulatory organization between March 2006 and October 2007, Gutman, who works in the firm’s conflicts office, improperly shared information with Tyndall that was non-public and material about at least 15 pending corporate merger and acquisition transactions

Tyndall then purportedly used the data to trade before at least six corporate announcements and recommended that customers and friends invest in the stock too. Tyndall and Gutman are longtime friends. The latter found out about the transactions from his job.

The inside information that Gutman provided Tyndall had to do with acquisitions involving Genesis HealthCare Corporation, American Power Conversion Corporation, First Data Corporation, Alliance Data Systems Corporation, SLM Corporation (Sallie Mae), and Cytyc Corporation. By settling, Tyndall and Gutman are not denying or admitting to the securities charges.

Insider Trading
Illegal insider trading happens when the trade is made using nonpublic, material information about a security. Often, there may be a tipster who provides the insider information to the person who makes the trade or the person with access to the nonpublic, material information may be the person who also makes the trade. Regulators have brought insider trading cases against directors, corporate officers, brokers, investment advisers, and others.

Shepherd Smith Edwards and Kantas, LTD LLP represents investors with securities fraud claims and lawsuit. Contact our securities law firm today.

FINRA Bars J.P. Morgan Vice President and Broker Friend in Insider Trading Scheme, FINRA, January 16, 2014

Insider Trading, SEC.gov


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JPMorgan To Pay $2.6B in Penalties in Bernard Madoff Ponzi Scam Settlements, Stockbroker Fraud Blog, January 7, 2014

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California AG Files Lawsuit Against JP Morgan Chase Alleging Debt Collection Abuse Over 100,000 Credit Card Cases, Stockbroker Fraud Blog, May 16, 2013

January 16, 2014

Spotlight on FINRA: SRO Disciplines Brokerages That Ignore Red Flags, Warns About Retirement Plan Rollover Conflicts, & Investigates for Stock Trade Incentives

FINRA Fines COR Clearing LLC $1M for Disregarding Red Flags
The Financial Industry Regulatory Association is continuing to crack down on brokerage firms that don’t detect and investigate “red flags” indicating possible suspect activity. Earlier this month it fined COR Clearing LLC $1 million for its purported failure to put into place procedures to detect and report suspect account activity.

The self-regulatory organization said that while the broker-dealer used a "tagged identifier list” to identify the entities and individuals linked to high risk accounts, the list only worked effectively when cross-checked against a demographic AML system, which included customer data that the firm had collected but was maintained by a third-party. However, the DAML database was incomplete because it did not include the names of COR Clearing’s introducing brokers.

FINRA cited the firm for not making sure its employees knew the criteria for detecting red flags warnings that there might be possibly suspect activity. It also said that COR Clearing’s AML program did not sufficiently deal with the fact that the business model involved services for introducing firms that engaged in microcap securities and third party wire activities, or that the program depended on these firms to look out for any signs of misconduct.

FINRA Watches Out for Broker Conflicts in Retirement Plan Rollovers
FINRA says it is on the lookout for possible conflicts of interest that could impact brokers when they roll over a customer’s company 401(K) plan into an individual IRA. These representatives typically have an economic incentive to move such funds into IRAs that they sell.

FINRA wants brokerages to make sure that their representatives are trained to comprehend related rollover implications, including fees and taxes. The SRO said that brokers should be careful in how they pitch IRAs to customers to ensure that they don’t give them any misleading or false information.

The SRO put out a regulatory notice telling member firms that they should not advise this type of transfer if it is better to keep the money in a customer’s company plan or move the funds to the plan of a new employer. The notice reminded brokerage firms that any recommendation to hold, buy, or sell securities must be suitable for each customer and the financial interests of the registered representative should not be an influencing factor.

FINRA to Look At Whether Brokerages Are Letting Incentives Impact Stock Trades
According to a recent study from Indiana University and the University of Notre Dame, brokers usually will send stock orders to the US market that pays the highest, making their own earnings more important than ensuring that their customers get the best prices. FINRA Market Regulations EVP Thomas Gira says that the SRO wants to make sure that its broker-dealer members are not making such decisions for their primary benefit, while shirking their obligation to ensure that investors’ best interests are the priority.

Gira says that the regulator expects to send some brokers a questionnaire this year so it can better understand how they choose among the over 50 exchange and alternative venues where American share trading take place. The venues make up the $22 trillion US equity market. They offer different order types and pricing schedules to get traders to use them.

FINRA Arbitration
Our FINRA arbitration lawyers represent investors with securities claims against financial firms and/or their representatives. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Regulators Plan Investigation of U.S. Stock Brokerage Incentives, SFGate, January 3, 2013

FINRA Fines COR Clearing LLC $1 Million for Extensive Regulatory Failures, FINRA, December 16, 2013

Finra warns against conflicts in retirement-plan rollovers, Investment News, December 30, 2013


More Blog Posts:
FINRA to Go After Rogue Brokers, & Includes REITs, Municipal Bonds, & Frontier Markets Among Its Enforcement Priorities for 2014, Stockbroker Fraud Blog, January 3, 2014

FINRA Arbitration Panel Says Wells Fargo Must Repurchase $94M of Auction-Rate Securities from Investors, Stockbroker Fraud Blog, December 29, 2013

FINRA Considers System That Would ‘Red Flag’ Customer Accounts at Brokerage Firms, Institutional Investor Securities Blog, December 27, 2013

January 3, 2014

FINRA to Go After Rogue Brokers, & Includes REITs, Municipal Bonds, & Frontier Markets Among Its Enforcement Priorities for 2014

The Financial Industry Regulatory Authority is setting up a team made up of six members to look at stockbrokers with long records of investor complaints and violations, as well as those that engage in “cockroaching”—which involves brokers moving among beleaguered firms. The crack down comes amidst pressure from lawmakers on Capitol Hill.

According to an analysis of state securities records by The Wall Street Journal last year, between 2005 and 2012 there were over 5,000 licensed securities brokers who had worked with at least or more firms that had been expelled by FINRA. The analysis also revealed that there were brokers who, even in the wake of being targeted by numerous arbitration claims or having declared bankruptcy more than once, have managed to keep working in the industry.

FINRA announced this new initiative this week in a letter to approximately 4,180 broker-dealers that are registered with the SRO. It said it would use the Broker Migration model, a computerized analytic system, to look at brokers who have gone from an expelled brokerage firm to other firms.

These latest actions are a widening of FINRA’s efforts to better police brokerage firm that retain rogue brokers. Already, it has barred 22 brokers for rule violations in these attempts. About 50% of these individuals were identified via investor complaints and tips, arbitration claims, and regulatory-disclosure forms.

Other enforcement priorities for FINRA in 2014 include mutual funds that invest in frontier markets, like Vietnam and Nigeria, that can be risky, have less liquidity, as well as lower investor protection standards than what is required in the US. The SRO also plans to crack down on trading strategies that are computer driven and take a closer look at market structure issues.

FINRA market regulation officer Tim Gira said that the regulator will also publish best practices for alternative trading systems, such as dark pools. He said that after examining off-exchange trading venues for a year, the SRO discovered that the operation of certain ATSs didn’t always align with the way they were described and sometimes “trading from a proprietary basis” differed from what was disclosed.

Meantime, FINRA remains worried about structured products that are interest-rate sensitive, including municipal securities, as well as anti-money laundering, microcap securities fraud, and cyber security. Also still on its radar over marketing and sale to (as well as suitability for investors): complex structured products, private real estate investment trusts, bond funds, mortgage-backed securities, bond ETFs, emerging market debt, municipal bonds, baby bonds, and private placement securities. FINRA says it will continue to watch out for senior financial fraud, microcap fraud, insider trading, and algorithmic trading abuses.

Our securities fraud lawyers work with investors throughout the United States, as well as investors abroad with claims against a firm based in this country. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Finra to Crack Down on Brokers With High Number of Complaints, The Wall Street Journal, January 2, 2014

From FINRA, January 2, 2014

Finra booted 16 rogue brokers this year, targeted 26 more for 'action', Investment News, November 22, 2013


More Blog Posts:

FINRA Arbitration Panel Says Wells Fargo Must Repurchase $94M of Auction-Rate Securities from Investors, Stockbroker Fraud Blog, December 29, 2013

Bank of America’s Countrywide to Pay $17.3M RMBS Settlement to Massachusetts, Institutional Investor Securities Blog, December 30, 2013

FINRA Considers System That Would ‘Red Flag’ Customer Accounts at Brokerage Firms, Institutional Investor Securities Blog, December 27, 2013

December 29, 2013

FINRA Arbitration Panel Says Wells Fargo Must Repurchase $94M of Auction-Rate Securities from Investors

A Wells Fargo & Co. (WFC) brokerage unit must buy back almost $94 million in auction rate securities from the family who said their adviser misrepresented the investments. The claimants are the relatives of deceased newsstand magnate Robert B. Cohen, who founded the chain Hudson News. Cohen died in 2012.

His family contends that Wells Fargo Advisors and one of its advisors made misleading and fraudulent statements about municipal auction-securities. They are alleging breach of fiduciary duty, negligence, and fraud in their municipal auction-rate securities fraud claim.

Now, the firm must buy back at face value the municipal ARS it helped Cohen, his family, and affiliated business purchase. The transactions started beginning March 2008.
(The FINRA arbitration panel, however, denied the Cohens punitive damages and compensation.)

Since the financial crisis that broke that year, Wells Fargo, Morgan Stanley (MS), Merrill Lynch (MER), UBS Wealth Management (UBS), Oppenheimer (OPY) and others have repurchased billions of dollars in auction-rate securities and consented to millions in fines to settle charges that they did not correctly supervise employees that provided investment advice, as well as failed to properly inform investors about the debt securities.

Many customers thought they were investing in securities that were liquid, like cash. They were therefore dismayed to discover that when the crisis hit and their auction-rate securities became frozen they could not access their money.

Our auction-rate securities fraud lawyers continue to help investors recoup their losses related to the financial crisis of 2008. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Wells Fargo Unit (WFC) Ordered to Buy Back Auction-Rate Securities, The Wall Street Journal, December 27, 2013

Wells Fargo to repurchase $94M in securities from family clients, Investment News, December 27, 2013


More Blog Posts:
Credit Suisse Must Face ARS Lawsuit Over Subsidiary Brokerage’s Alleged Misconduct, Says District Court, Stockbroker Fraud Blog, January 11, 2013

Financial Firms Update: Morgan Stanley Now Owns Smith Barney, Wells Fargo & JPMorgan Defeat Estimates, MLB All-Star Sues UBS for $7.6M, & Ray Lucia, His Firm Fined Over “Buckets of Money” Strategy, Stockbroker fraud Blog, July 12, 2013

Securities Lending Trial Against Wells Fargo & Co. is Underway, Institutional Investor Securities Blog, June 21, 2013