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The financial industry is highly regulated, and for good reason.   People entrust their stockbrokers and financial planners with some of the most important decisions in their lives, namely, what to do with their hard earned life savings.  Money is important, and especially for the elderly and retired, it cannot always be replaced.   If money is lost in bad investments, there might not be time to earn more money back.

When brokers and planners go bad.

And let’s face it, some brokers go bad.   Sometimes, brokers steal money from their clients. Sometimes, brokers make foolish or unwise recommendations.  The broker might do this because he or she is struggling to meet a sales quota, or maybe he or she is just no good at his or her job.

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Virtually every new account application with any brokerage firm contains a pre-dispute arbitration agreement. This agreement requires that any dispute you have with your stockbroker or brokerage firm be filed with the Financial Industry Regulatory Authority (“FINRA”) instead of being filed in court. The FINRA arbitration process differs from the court system in several key aspects: the case will be decided by 1 or 3 arbitrators instead of a jury; there are no depositions or interrogatories permitted in FINRA arbitrations (with very limited exceptions); FINRA arbitrations are not a matter of public record (the only aspect of FINRA arbitration proceedings that is made public are the awards); and there are extremely limited grounds for appealing a FINRA arbitration award.

The way a FINRA arbitration case generally works is this.

Claimant files the initial document that begins the FINRA arbitration called the Statement of Claim.  It identifies the parties, contains the allegations of wrongdoing, and sets forth the amount of damages being claimed.  Once it is filed with FINRA, FINRA will serve it on the named Respondent.   The Respondent then has forty-five (45) days to file a Statement of Answer.

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Prime Bank Instrument Fraud 

If you have been approached to invest in “prime bank” instruments, don’t do it!  It is a scam. Prime bank scams purportedly involve the trading of prime bank instruments issued or guaranteed by financial institutions such as the World Bank, the International Monetary Fund, or the U.S. Federal Reserve Bank.  Promoters of these supposed prime bank investments claim investors are guaranteed to receive high-yield returns in a matter of days or weeks, with little or no risk.  According to the U.S. Securities and Exchange Commission, these investments do not exist.

Fraudsters may use complex and official-sounding terms such as, debenture, bank guarantee, private funding project, offshore trading program, trading facility, or guaranteed bank note, in an effort to make the scheme seem legitimate.  Oftentimes, promoters will claim that the instruments are available by invitation only to select clients. They may claim these are the “secret” way wealthy people make money and will cite a requirement for secrecy if a potential investor asks for references.  Some goes so far as to have investors sign official-looking non-disclosure agreements.

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One scam still making the rounds is the fake check scam.  The way it generally works is this.  You receive an authentic-looking check in the mail that appears to be from a real company. Along with the check, you receive instructions to deposit the check and transfer a portion of the money to someone else.  A few days later your bank informs you that the check was counterfeit and you are now liable for the amount of money transferred out (usually thousands of dollars) and the bank fees for checks you had written that bounced.

FINRA recently issued an Investor Alert warning of two variations of the fake check scam – the mystery shopping scam and the modeling scam.

How the check cashing scams work

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Illegal sales practices: Wells Fargo To Settle

Wells Fargo & Co. has agreed to pay $185 million to settle federal regulators’ investigation for illegal sales practices.  The bank acknowledged that it pushed employees to open as many as 2 million accounts without customers’ approval.  As a result of the scandal, Wells Fargo said, effective January 1, 2017, it would eliminate any sales goals for credit cards, checking accounts and other retail banking products.

The bank’s CEO, John Stumpf, who is set to testify before the Senate Banking Committee on September 19, said he takes responsibility for the improper sales tactics. He indicated that the bank now has improved its training programs and supervision.  The bank also indicated that the employees involved in the improper sales practices were low-level employees and the practices were not intended to increase bank profits.

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What Does it Mean to Trade Stock Options?

Options are complex investments and can carry substantial risk. Before you decide to trade options, you should understand the basics. Options can be used with a wide range of financial products.  This blog will focus on the most vanilla of examples, trading stock options.

What are Options?

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Over $100 Million in Rewards Given to Whistleblowers

The SEC has announced that, as of yesterday, it has made more than $100 million in awards to whistleblowers under the SEC Whistleblower program.  Created by Congress as part of the Dodd-Frank Act in 2010, the program has been up and running since August 2011.  After five years, the program appears to be a resounding success.

Under the whistleblower program, one who voluntarily provides a useful tip to the SEC that leads to the recovery of over $1 million in sanctions may get an award.  The information regarding a securities law violation must be independently known by the whistleblower and cannot be derived from another source.  The amount of the award is discretionary, but under SEC rules, the amount will be between 10% and 30% of the SEC’s recovery.  The amount may be adjusted based on the significance of the information provided, the degree of assistance provided by the whistleblower, the SEC’s interest in deterring future violations, and the whistleblower’s cooperation with a company’s internal compliance and auditing systems.  The Dodd-Frank Act also included anti-retaliation protections, creating both a private right of action for whistleblowers and enforcement mechanisms for the SEC.

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West Palm Beach Securities Fraud Lawyer Explains: Equity Compensation is Not Just for CEOs Anymore

Equity compensation, also known as a stock award, is a form of non-cash compensation that represents ownership in a company.  If the company does well and the value of its stock goes up, the future value of the stock award could be higher than if the employee was given cash today.  Equity compensation is one way for a company to attract or retain talent without having to pay out large salaries.

The popularity of equity compensation for rank-and-file employees, especially among cash-strapped start-up companies, is on the rise.  According to a study done in 2010 by the National Center for Employee Ownership, 28 million employees in the U.S. owned stock or stock options in their companies.  The most common types of equity compensation are stock options and restricted stock units (RSUs).

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When Selling Municipal Bonds What are the Broker’s Obligations

Many brokers and customers mistakenly believe that municipal bonds are always a “safe” place to be.  The recent debacle in Puerto Rico proves this is not the case.

The law imposes special obligations upon brokers who sell municipal bonds.

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Helping Families of Kids With Special Needs Save for the Future  – ABLE Plans

Starting July 1, Florida families with children who have special needs will have another option available to help them save for the future costs of caring for their loved one.  Florida’s ABLE United Program is one of four such plans nationwide.  The ABLE (Achieving a Better Life Act) investment plan will allow families to save tax-free for future expenses, while maintaining government benefits such as Supplemental Security Income and Medicaid.

Who is eligible for a Florida ABLE United Program account?