Articles Tagged with investor

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As contingency fee lawyers, we evaluate a steady stream of potential securities fraud cases.  We meet with investors of all ages and backgrounds who have been cheated, defrauded and tricked into making bogus investments.  We evaluate far more cases than we agree to take.

One of the most difficult types of cases that we evaluate is the so-called alternative investment case.   Alternative investments are not traditional stocks or bonds purchased through a normal brokerage firm.   Instead, these investments are offered directly by a promoter of some business scheme, perhaps an oil well, a gold mine, a real estate development, or some brand new technology.  The promoter offers the chance to get in on the “ground floor” and make enormous profit.

The alternative investment can take the form of a limited partnership interest, an LLC interest, or some other portion of a small, non-publicly traded business entity.  The investor does not get normal account statements, like a regular brokerage firm.  Instead, the investor gets a K-1 at the end of the year for tax purposes and perhaps a regular newsletter on how the gold mine, oil well (or whatever) is doing.  It’s almost always doing great!

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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.

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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.
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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

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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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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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In our law firm, we frequently represent elderly clients in claims against brokerage firms and financial advisors.  These claims usually include allegations that the broker took advantage of the elderly client, or recommended improper investments that benefited the broker more than the client.

Why and how do the elderly become so vulnerable to stockbroker abuse?  Some of the answers may surprise you.

Isolation and Loneliness  We have seen, over and over, elderly clients who are isolated and lonely.  We practice in South Florida, a haven for elderly retirees.  Many times, our clients’ families and loved ones live thousands of miles away.  On a day-to-day basis, these clients have very few friends or social interactions.

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As the investing population ages, it becomes more and more likely that investors will suffer failing physical and/or mental health.  Your permanent – or even temporary – incapacity could make managing your own investment accounts impossible.  One potential preemptive solution is for you to give a power of attorney (POA) to a family member or trusted friend for your investment accounts before you become incapacitated.

A POA is a legal document that permits the person you name to make decisions on your behalf.   The person who is named in your POA is called your “attorney-in-fact.”  Giving someone else control over your finances shouldn’t be done lightly. Yet, it can be vital if you unexpectedly become incapacitated because of a stroke, auto accident, or other unforeseen event.

Here are a few things to consider before you grant someone else power over your investments:

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Last spring, FINRA launched a Securities Helpline for Seniors – known as HELPS – as a resource for senior investors with questions and concerns.  With the country’s growing population of senior citizens, who are often targeted in fraudulent and deceptive investment schemes, the HELPS line is just another resource in FINRA’s recent push to protect our aging population.

The HELPS line launched on April 20, 2015, and through December 2015, more than 2,500 calls had been placed through the hotline.  The average age of the caller was 70 (though the actual age range was 22 to 100), and the calls lasted an average of 25 minutes each.  In 2015, HELPS staff assisted callers in recovering $750,000 in voluntary reimbursements from securities firms.

FINRA is also using data collected during calls to assist it with its regulatory goals.  By tracking trends in the calls placed to the hotline, FINRA can more readily issue Investor Alerts on topics of current interest.  For instance, after a spate of calls about transfer on death accounts, FINRA issued an Investor Alert about that specific topic.

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Starting May 16, 2016, companies can use crowdfunding to offer securities to John Q. Public.  Crowdfunding generally refers to obtaining small individual investments from a large number of people to finance a particular project. Here are some helpful tips to see if making a crowdfunding investment may be right for you.

Who uses crowdfunding?

Startups and early-stage ventures may use crowdfunding to seek financing for the development of a new product or service.  Prior to the approval of crowdfunding regulations, this type of “ground-floor” investing was typically unavailable to the mom and pop investor.