We’re seeing a disturbing trend of financial advisers borrowing money from their own clients — a prohibited practice in the investment industry. Notwithstanding their claimed financial expertise, many brokers and investment advisers seem to run into personal money problems. Some turn to their clients for a way out. The adviser’s pitch usually goes something like …
InvestmentNews, an influential source of news, analysis, and information concerning the financial advisory community, has published a March 17, 2018 editorial that strongly urges the adoption of an idea for protecting investors who win arbitration awards against brokerage firms but are unable to collect because the firm is uninsured and goes out of business. And, the …
As you cruise around our website, you’re likely to see references to the Financial Industry Regulatory Authority, more commonly known by the acronym “FINRA”. If you don’t know what FINRA is and what it does, here’s a brief explanation. About FINRA FINRA is a private corporation that regulates brokerage firms and helps to oversee stock …
The Financial Industry Regulatory Authority (FINRA) hopes to facilitate a faster method for small claim attribution by the launching of a new time-limited hearing over the phone. Those with claims of $50,000 or less may be able to use this expedited method. The move, called the Special Proceeding for Simplified Arbitration, was done after being …
When stockbrokers who commit fraud or other sales abuses are barred from working in the securities industry, they often keep their insurance licenses. This occurs because state governments generally have separate departments regulating securities and insurance. This means that the insurance agent who wants to sell you variable life insurance or annuities may be a bad broker who, …
A stockbroker is not permitted to indiscriminately sell any available investment product to any customer he or she chooses, nor may a broker follow a “one-size-fits-all” sales strategy. Such activities are forbidden by what is generally known as the “suitability rule.” The rule dictates that brokers’ recommendations to buy, sell, or hold securities or to …
“Irrespective of Whether a Firm Must Meet A Suitability Or Fiduciary Standard” We always have contended in arbitrations – usually successfully – that under the common law of most states, stockbrokers are fiduciaries. Under a fiduciary standard, the broker is required to make recommendations guided solely by the best interests of the customer. But stockbrokers …
FINRA has filed with the Securities and Exchange Commission a proposal to narrow the definition of a public arbitrator, precluding anyone with financial industry experience from qualifying for the category. Brokerage customer contracts contain mandatory arbitration clauses that for the most part, prevent customers from suing brokerage firms in court. The parties instead choose a …
Claimants lawyers have long complained that brokerage firms should not be permitted to insist, as a condition of settling a dispute, that the customer must cooperate in having the broker’s bad acts expunged, i.e., scrubbed from the public record. Expungement essentially amounts to a declaration that the broker did nothing wrong. But a declaration that …
The Financial Industry Regulatory Authority intends to field an enforcement team tasked with focusing on brokers whose records show patterns of complaints or sales abuses. The team will review both the quality of a firm’s due diligence in the hiring process and in monitoring higher risk brokers. For instance, scrutiny will be paid to whether …
As we’ve explained repeatedly on this site, every recommendation made or sales strategy employed by a brokerage firm or broker on behalf of a customer must be suitable for that customer. An unsuitable recommendation or strategy can leave the firm or broker civilly liable if the customer incurs damages. FINRA recently issued Regulatory Notice 13-31 …
In October 2011, Charles Schwab & Company informed its customers that it had amended its account agreement to prohibit customers from either bringing a class action suit against Schwab or participating as a class member in such an action. The amendments also purported to force the customer to agree that arbitrators would be precluded from …
Interest rates are near all-time lows. Consequently, whenever rates finally start moving again, we all know they’ll be going up. No one knows for sure when rates will begin to rise, but the Financial Industry Regulatory Authority must be worrying that the day isn’t far off. It’s just released an Investor Alert entitled “Duration – What an …
On September 27, 2012, FINRA Chairman and CEO Richard G. Ketchum spoke at the Complex Products Forum sponsored by the Securities Industry and Financial Markets Association (“SIFMA.”) (You can read the speech here). SIFMA is a trade association and lobbying group that represents hundreds of securities firms, banks, and asset managers, so Ketchum was addressing …
The Financial Industry Regulatory Authority (FINRA) announced today that it has censured and fined Merrill Lynch for deficiencies in required disclosure reports and for often failing to file such reports. Merrill was fined $500,000 for its supervisory lapses. The violations, which supposedly went undetected for years, involved non-disclosure or inadequate disclosure of customer complaints, arbitration …
