Articles Tagged with FINRA

Published on:

FINRAFINRA has released its annual examination priorities letter.  The letter identifies the specific areas FINRA will be focusing on when it conducts examinations of its member brokerage firms in the coming year. According to FINRA, the list is developed based on trends it has seen in the previous year, as well as concerns expressed to FINRA by brokerage firms, investor advocates, and other regulators.  In 2017, FINRA has said it will pay particular attention to the following items, among other things:

High-Risk Brokers

Statistics show that brokers who have committed misconduct against customers are more likely to commit additional violations in the future. FINRA will closely examine the supervisory procedures of brokerage firms who hire or retain brokers with a significant history of prior sales practice complaints. Specifically, FINRA will be checking the adequacy of the firm’s procedures to detect and prevent future misconduct by recidivist brokers.

Published on:

AdobeStock_78797750-300x199It’s your money.  You worked hard to earn it. It’s taken years to save it. Now you need to protect it. Here are some tips to help you make more informed investment choices and protect yourself from investment scams.

  1. Check out the “salesperson.” Just because someone says they have a securities license doesn’t mean it’s true. We recently had a potential client call with a complaint about his “stockbroker” who we quickly discovered hasn’t been licensed since the 1990’s. Checking out purported stockbrokers is easy and free at FINRA’s BrokerCheck site. In addition to information about the securities licenses the individual has, it will show you his or her employment history, if he or she has ever filed for bankruptcy, and any customer complaints or charges by securities regulators.
  1. Don’t believe promises of little or no risk with high returns. The higher the returns, the riskier the investment. Period. 
Published on:

When you open a brokerage account, you most always agree to bring any future disputes that arise with your stockbroker or brokerage firm to FINRA for adjudication. This means you give up your right to a jury trial.

FINRA offers both arbitration and mediation services. In a nutshell, mediation is where a neutral third-party attempts to help the parties reach an amicable settlement. Essentially, the mediator points out what he or she sees are the strengths and weaknesses of each party’s position. In arbitration, one or three arbitrators (depending on the amount in dispute) hear testimony, review evidence, and render a binding decision. It is possible to utilize both methods in the same case.

Here are some of the main ways that arbitration and mediation differ.

Published on:

stock marketIf you have lost money in a securities investment, obviously you would be happy to recoup some of those funds.  Many companies that offer assistance with recovering lost capital, however, are likely fraudulent.  A company may sound credible, have authentic looking documents, and a fancy website, but if the deal sounds too good to be true, it probably is a scam.

Tips for Investors

  • Be a Skeptic. Assume that any “recovery” company that reaches out to you is a fake until you can independently verify it is a legitimate company – especially if it claims to be registered with FINRA. Look it up on FINRA’s BrokerCheck site and use the contact information on the BrokerCheck report to reach out to the firm.
Published on:

Yes, technically, but in reality, no.  Under the law, a FINRA securities arbitration award can be appealed, but practically speaking, arbitration awards are rarely changed when appealed.   Indeed, under the Federal Arbitration Act and the Florida Arbitration Act, a party has the legal right to file an action in court to vacate or modify an arbitration award.  Arbitration awards, however, are very difficult to overturn or modify.

Indeed, federal and state courts give substantial deference to an arbitration panel’s award, notwithstanding that arbitration panels are not necessarily bound to follow the law and can even misapply it with impunity.  Instead, an arbitration panel may enter an arbitration award that it believes results in a fair or equitable outcome.

FINRA Securities Arbitration Award

Published on:

An investor who is abused by his or her securities broker cannot sue in court.  Instead, the investor must sue the broker or the brokerage firm in arbitration before the Financial Industry Regulatory Authority, otherwise known as “FINRA.”

FINRA maintains its own arbitration forum that shares certain features of court litigation, but is also different in many material ways.  Here are seven key differences between FINRA arbitration and litigation in court:

  • First, FINRA staff processes the claim filed by the customer against the broker or firm and administers the entire case, not the clerk of court.
Published on:

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.

Published on:

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.

Published on:

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.

Published on:

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