FINRA

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

An article in Barron’s last week entitled “The Street’s Due-Process Joke” reports that investors who sue their brokers must accept an arbitration process run by officials appointed in an inscrutable manner. The author describes FINRA as a “a secretive, combative, industry-controlled, self-regulatory organization” and notes that some accuse FINRA of having a biased arbitrator pool

“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

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

Yesterday, we discussed an anti-investor ruling that permits Charles Schwab & Company to force its customers to waive their right to participate in class actions against Schwab. That ruling potentially could lead to such a restriction becoming an industry-wide practice. We mentioned that FINRA might choose to appeal the ruling. The word “might” no longer