Articles Posted in Regulatory Audits & Investigations

Brokers beware; FINRA is watching your firm, and you.  Becoming embroiled in a regulatory inquiry or investigation can become a major and costly headache and impediment to registered representatives’ business.

In January 2016, the Financial Industry Regulatory Authority (FINRA) released its annual list of priorities, showing what sorts of sweeps they may perform, and investigations they may bring, in the coming year.  brokers working in the securities industry should be aware of the priorities that are relevant to them, including those having to do with sales practice.

FINRA’s 2016 Priorities make clear that they intend a top-down review of the following areas, which may lead to firm-wide or broker specific investigations, including:

  • Suitability – FINRA seems particularly concerned about complex, speculative, interest-sensitive or other alternative products. FINRA cited that some firms rely too heavily on third-party information and sometimes don’t perform the necessary due diligence or education of their employees that are generally required by industry rules.
  • Concentration – Related to suitability of alternative products is the necessity to monitor and supervise concentration in customers’ accounts of these often risky and speculative products. FINRA notes that some firms have deficient systems to monitor and ensure suitable recommendations are being made.
  • Senior and Vulnerable Investors – FINRA has steadily increased its monitoring and enforcement to further protect seniors and other vulnerable investors. FINRA noted in the 2016 Priorities that it has seen instances of fraud and abuse of seniors, including people using a position of trust to gain control over elderly investors’ assets.
  • Sales Charge Discounts and Waivers – FINRA noted that they brought several enforcement actions in 2015 and obtained large fines of firms, including firms who failed to apply eligible volume discounts, sales charge waivers for mutual funds, unit investment trusts (UITs), non-traded real estate investment trusts (REITs) and business development companies (BDCs).
  • 529 College Savings Plans – These accounts are generally opened by investors who wish to create tax-deferred accounts to help save for minors’ education. Class A shares are often more economical than Class C shares.  Despite this, FINRA stated that it has observed relatively large purchases of Class C share purchases.  FINRA made clear that they expect firms to perform suitable due diligence to determine that 529 Plan share classes are appropriate for each customer.
  • Private Placements, JOBS Act and Public Offerings – FINRA disclosed that they will be investigating to ensure that proper disclosures are made by firms, be it to the general public in Regulation A+ offerings, or to retail investors who are recommended private placements, non-traded REITs, Direct Participation Programs (DPPs) and BDCs.
  • Outside Business Activities (OBAs) – FINRA noted that they regularly see that firms do not properly assess disclosures made by registered representatives of their OBAs. FINRA will be investigating firms’ policies and procedures to determine if conflicts are created by OBAs and whether they must be treated as private securities transactions.

These 2016 Priority items may begin with a sweep or inquiry by FINRA to the broker-dealer firms, but may also be initiated directly with registered representatives or financial advisors.  Generally, FINRA’s first contact would be by issuing an 8210 Request.  Just receiving an 8210 Request does not mean you have done anything wrong.  As we have explained in prior blog posts, 8210 Requests raise real issues for the licensed individual.  First, you must respond to the Request, or risk losing your securities license.  Second, while your firm may offer to represent you, it is imperative that you determine whether the firm actually represents your best interests.  We regularly represent registered individuals before FINRA through the 8210 process.

The Attorneys at Malecki Law are experienced with and regularly represent clients who have become embroiled in regulatory investigations.  We have obtained favorable results for our clients, including settlements and declarations of no action taken by regulators.  Contact us for a free consultation.  Various hourly-billing and flat-fee based options are available to make smart decisions from inception to the completion of your matter.

The sad truth is that the Government loves the easy kill.  It is often easier for regulators to extract settlements and punishments against smaller market participants, including brokers, traders and analysts, than the giant wire houses, because large companies can match the resources of the Government.

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), among other regulators, regularly engage in investigations to explore, deter and punish market conduct that violates the securities laws and industry rules.  While it can be hard to know what those investigations will be, the regulators like the SEC disclose regulatory priorities on an annual basis.  These examination priorities are areas where the SEC will be dedicating resources throughout 2016.

Of the 2016 Priorities announced by the SEC, the following may lead to broad investigations:

  • Recidivist Representatives and their Employers – the SEC has announced they will use data analytics to identify and track individuals with a track record of misconduct, as well as the firms that employ them.
  • Anti-Money Laundering (“AML”) – AML is usually a topic of great interest by the regulators. Brokers and broker-dealers will be scrutinized for their testing and adaptation to the evolving AML regulatory landscape.
  • Microcap Fraud – Microcap, or small offerings by companies of $50-300 million, will be examined by the SEC for fraudulent conduct, such as aiding and abetting and “pump and dump” schemes.
  • Excessive Trading – the Commission will also use analytics, especially from clearing firms, to try to identify the brokers who engage in inappropriate or “excessive” trading.
  • Product Promotion – the SEC will consider suitability issues for new, complex and/or risky products.

The SEC also noted that they will be keeping a watchful eye on the EB-5 Immigrant Investor Program, transfer agents, as well as considering fee and expense issues with private fund advisors.  We are actively involved in these and other such investigations by the SEC and FINRA.

Often, your first contact with the regulator like the SEC or FINRA will be by the receipt of a Subpoena.  This does not mean you have done something wrong.  As we have explained in prior blog posts, it could mean merely that you might be a witness and have information, but that no charges will be brought against you.  Nonetheless, you may still be required to provide a written response to the Subpoena, and submit to a recorded interview where you may answer questions under oath.  It is imperative that you retain securities counsel with regulatory defense experience to make sure you comply while not waiving rights you may be entitled to.

If the Commission considers you a target that has potentially violated the Securities laws or industry rules, they may file charges after issuing a Wells notice.  This proceeding most often takes place before an Administrative Law Judge, though some cases may be initiated in Federal court.  Either way, it will be imperative that you are represented by counsel to oppose the charges brought against you, conduct discovery, and enter evidence and witnesses at the hearing to defend yourself against the Commission’s charges.  In this regulatory environment, you need to be mindful that criminal charges are not also brought against you.

The Attorneys at Malecki Law are experienced with and regularly represent clients who have become embroiled in regulatory investigations.  We have obtained favorable results for our clients, including settlements and declarations of no action taken by regulators.  Contact us for a free consultation.  Various hourly-billing and flat-fee based options are available to make smart decisions from inception to the completion of your matter.

 

Recently, FINRA issued the 11th Regulatory and Examination Priorities Letter that addresses issues in the financial industry, if left unaddressed could adversely effect market integrity and investors. In 2016 their key points of emphasis have been identified as  (1) culture, conflicts of interest and ethics; (2) supervision, risk management and controls; and (3) liquidity. The Letter also highlights specific policies and procedures the FINRA will use to ensure that member firms are compliant with the priorities identified.

According to Richard G. Ketchum, CEO and Chairman, FINRA, “ Firm culture, ethics and conflicts of interest remain a top priority for FINRA. A firm’s culture contributes to, and is also a product of, a firm’s supervision and its approaches to identifying and managing conflicts of interest and the ethical treatment of customers. Given the significant role culture plays in how a firm conducts its business, this year the letter addresses how we will formalize our assessment of firm culture to better understand how culture affects a firm’s compliance and risk management practices.”

  • Culture, Conflicts of interest and Ethics

Although firm culture can be interpreted subjectively, FINRA expressed its intent this year to craft its own definition of “firm culture” and formalize its assessment based on how executives, supervisors and employees make and implement decisions in the course of conducting a firm’s business. FINRA has express that firm culture is an important indicator of how a firm manages conflicts of interests and ethics. FINRA does not intend to dictate firm culture but rather understand with a view to how it affects compliance and risk management practices internally in a firm.

As per FINRA 2016 the five indicators that will be assessed for a firm’s culture include
(1) whether control functions are valued within the organization
(2) whether policy or control breaches are tolerated
(3) whether the organization proactively seeks to identify risk and compliance events
(4) whether supervisors are effective role models of firm culture
(5) whether sub-cultures (e.g.,  at a branch office, a trading desk or an investment banking department) that may not conform to overall corporate culture are identified and addressed.

Since a firm’s culture is both and input to and product of its supervisory system, it is critical to identify that to assess fair and compliant treatment of customers. They will seek to understand how far these firms tolerate ethical breaches, take visible steps to mitigate conflicts of interest, and have compliance functions in keeping with the changing regulatory landscape.

  • Supervision Risk Management and Controls

Closely related to culture, FINRA’s rules require firms to maintain systems to supervise activities of their associated persons to help the firm adhere to securities laws and FINRA rules. In 2016, FINRA has identified four focus areas which have continued to pose concerns. First being management of conflicts of interest, in particular a firm’s incentive structures. The review they will undertake will encompass conflict mitigations specially arising from compensation plans for representatives and how firms approach conflicts of interests arising from sale of proprietary and affiliated products, or products that result in revenue sharing and other third-party payments. FINRA’s review will draw on suitability and overconcentration issues. FINRA will remind firms that we they have filed the proposed Rule 2273 with the SEC, which relate to recruitment practices and whether transfer of assets to the recruiting firm and financial incentives received by a registered representative may create a conflict of interest.

In keeping with FINRA’s research rules, firms may not use research analysts or the promise of offering favorable research to win investment banking business. FINRA will assess whether firms’ research analysts are inappropriately involved in their investment banking activities and whether investment banking personnel exercise undue influence on analysts.

Some of the other priorities identified include mitigating information leakage within or outside a firm, outsourcing (reminding firms that they remain responsible for supervision of third parties), and anti-money laundering (particularly, where certain customer transactions are automatically excluded from portions of AML surveillance, the reasoning for the decision should be documented for FINRA to check).

  • Liquidity

Since the failure to monitor liquidity led to financial failure and systemic crisis, FINRA will rigorously continue to monitor firm’s liquidity requirements, contingency funding practices and the effectiveness of these contingency practices to weather market wide and internal stresses. FINRA will focus on high-frequency trading (HFT) firms’ liquidity planning and controls and whether sudden changes in a firm’s execution rate, triggered by a market event or other factors, could create liquidity challenges for a firm. FINRA will continue to focus on firms’ liquidity risk management practices, guided by the framework established by the agency in its Regulatory Notice 15-33

 

Per Financial Industry Regulatory Authority’s (FINRA) announcement this week, a former registered representative of Caldwell International Securities Corp., Richard Adams aka Rasheed Aree Adams, has been barred permanently from the securities industry for churning customer accounts, other securities violations, and failure to report many unsatisfied judgments and liens on his U4 Registration Form as stipulated in FINRA rules. In addition to Caldwell, he was also previously registered with PHD Capital and E1 Asset Management Inc. from 2002 to 2011.

FINRA’s investigation revealed that Adams excessively traded the accounts of two customers, between July 2013 and June 2014, resulting in profits and commissions in the excess of $57,000 for himself while resulting in losses amounting to over $37,000 for customers. The findings stated that as a result Adams willfully violated section 10(B) of the Securities Exchange Act of 1934 and rule 10B-5, willfully failed to amend Form U4, and failed to provide documents requested by FINRA. Adams neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

Richard Adams is no stranger to regulatory and legal proceedings and has a reported history of customer disputes and violations. According to the CRD 13 judgement/liens, 5 customer disputes, 2 investigations and 1 regulatory disclosures have been reported against him. In 2001 there were allegations of unsuitability, unauthorized trading, and churning made against him while he was employed at The Golden Lender Financial Group, Inc, and this customer dispute was finally settled for $10,000. Currently, there is a pending FINRA investigation against Adams for potential violation of FINRA rules 2010 and 2111, and willful violations of Article V, section 2 from 2014.

FINRA aims to protect retail investors from broker activities such as churning and aggressively pursues brokers who put their own commissions ahead of customer interests. New York securities law attorneys of Malecki Law have successfully represented investors in cases involving account churning and overtrading, i.e. when a broker trades an account too frequently, usually for his or her own profit.

Please contact Malecki Law if you suspect you have been a victim of securities fraud. To assess if your broker is responsible for misconduct, read here for typical signs associated with securities fraud and misconduct. Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA’s BrokerCheck at no cost.

FINRA has announced that it has fined Aegis Capital Corp. $950,000 for sales of unregistered penny stocks and anti-money laundering violations.    According to FINRA, this fine was also related to supervisory failures within the firm.

The firm was not the only one that FINRA appears to have come down hard upon.  Reports show that Charles D. Smulevitz and Kevin C. McKenna, who each served as the firm’s Chief Compliance and AML Compliance Offices were given 30-day and 60-day principal suspensions and fined $5,000 and $10,000, respectively, per FINRA.  Aegis’ president, Robert Eide, was also reportedly given a “time-out” in the form of a 15-day suspension for failing to disclosed more than a half-million dollars in outstanding liens, in violation of FINRA rules.

FINRA reportedly found that from April of 2009 through June of 2011, Aegis liquidated almost 4 billion shares of penny stocks which were neither properly registered nor exempted from registration with the US Securities and Exchanges Commission.  According to FINRA, Aegis committed these violations in spite of a multitude of “red flags” or warning signs that something was amiss.

This does not appear to be the first time Aegis has come under fire from claims of improper supervision.  According to its BrokerCheck Report, Aegis has been the subject of a number of regulatory actions pertaining to violations and failures of its supervisory procedures.

The attorneys at Malecki Law have personally handled cases against broker-dealers like Aegis and others, relating to alleged supervisory failures and other alleged violations of the securities laws and industry rules.  If you or a family member lost money with Aegis Capital Corp., contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

“My broker dealer wants me to meet with its lawyers.”  This is the start of a FINRA registered representative’s worst nightmare.

Your heart is pounding and your head starts to race.  “Why me?” “What do they want to know?”  “What could I have done?”  “Are they going to ask me about the XYZ account?”  “I’m sure that I did everything right and by the book, didn’t I?”

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If you did do something that may have been a violation of the law, FINRA Rules, or the firm’s manual, you will likely begin to think about the potential punishment (fine, suspension, termination) even before you hang up the phone or close the door to your office.  Once an investigation into your conduct starts, you are not able to leave with a “voluntary” termination, but at best would be “permitted to resign during a firm investigation.”

Ultimately, no matter where your mind goes at first, it will almost certainly arrive at the same question eventually: “Do I need a lawyer?” and “If I get a lawyer, can I bring them with me when I meet with the firm’s lawyers?”

The answer to these questions is almost always a “Yes.”  Retaining counsel is generally a good idea in these situations for a number of reasons.

A broker-dealer’s lawyers getting involved is usually a sign that there is a problem.  You may be a part of the problem, a scapegoat for larger supervisory issues, or you may be an innocent by-stander or witness.  Though it can be difficult to know for certain, retaining an experience securities attorney and having an open and candid conversation with them can go a long way toward helping you determine which position you are most likely in.  Having a good idea of which position you are in (target or witness) will help you determine which approach to take before meeting with the firm’s lawyers.

While honesty is always the best policy, it is critical to know if your firm’s lawyers are “friend or foe.”  The cardinal rule for speaking to your firm’s attorneys is to ALWAYS REMEMBER YOUR FIRM’S LAWYERS REPRESENT THE FIRM, NOT YOU.  Therefore, it is possible that your firm’s interests are not aligned with yours, meaning your firm and/or your supervisors may be looking to throw you under the proverbial bus, thereby avoiding blame themselves.

If you did do something against the rules, you need to remember that there is a very real possibility that your firm may turn over some or all of the findings of their internal investigation to either the SEC, FINRA, or both.  So, if you may have committed a violation, you need to treat your conversation with the firm lawyers much in the same way as if you had received an SEC subpoena or a FINRA 8210 request.   This is going to be the first step in your defense.

Ultimately, you need to look out for yourself.  If you did nothing, you should make sure you are not the scapegoat for something you did not do.   Or, if you did commit a violation, you need to ensure that you are well represented throughout the whole process and present a cogent defense, as well as manage your exit from the firm in the best way possible.

 

If your firm has requested that you speak to in-house and/or outside counsel, you should contact the securities lawyers at Malecki Law for a free consultation at (212)943-1233.  The attorneys at Malecki Law have extensive experience representing clients in formal regulatory and internal investigations, and are here to help.

The Securities and Exchange Commission (SEC) announced today that is has formally charged Malcolm Segal with running a Ponzi scheme and stealing investor money from his office in Pennsylvania.  According to his BrokerCheck Report, Mr. Segal was formerly a registered stockbroker with Aegis Capital Corp. and Cumberland Advisors.  Mr. Segal reportedly was a partner in J&M Financial and the president of National CD Sales.

According to the SEC, Mr. Segal allegedly sold what he called certificates of deposit (CDs) to his brokerage customers under the false pretense that he could get them a higher rate of interest than was then available through banks.  Mr. Segal allegedly represented to his victims that his CDs were FDIC insured and risk-free. Mr. Segal reportedly defrauded at least fifty investors out of roughly $15.5 million.

As his scheme was unravelling, Mr. Segal allegedly began to steal from his customers’ brokerage accounts by falsifying fraudulent paperwork such as letters of authorization. This fake paperwork reportedly allowed Mr. Segal to withdraw funds from his customers’ accounts without them knowing.  Ultimately, in July 2014, the scheme collapsed completely.  Mr. Segal has since been barred from the securities industry by the Financial Industry Regulatory Authority.

Because Mr. Segal was registered with a broker-dealer, Aegis, at the time he was operating this scheme, investors may be able to recover against the broker-dealer for supervisory failures and negligence.  In this way, it is possible that Aegis may be responsible to Mr. Segal’s victims for some or even all of their losses.  The same may also apply to Mr. Segal’s prior broker-dealer, Cumberland.

Malecki Law has significant experience representing the victims of Ponzi-schemes and stockbroker theft.  The attorneys at Malecki Law have successfully handled numerous cases on behalf of Ponzi scheme victims.  If you or a family member were a victim of Malcolm Segal or a similar Ponzi scheme, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

 

 

Broker Dealer Financial Services Corp. (BDFS) based out of West Des Moines, Iowa just learned the hard way that nontraditional Exchange Traded Funds (ETFs) are risky, speculative investments and are not appropriate for all investors.

The Financial Industry Regulatory Authority (FINRA) recently fined BDFS $75,000 for 1. failing to properly supervise the sale of leveraged ETFs to its customers, 2. not properly training its sales force about the appropriate use of leveraged ETFs in customer accounts, and 3. not adequately supervising nontraditional ETF activity in customer accounts.

According the Letter of Acceptance, Waiver, and Consent, from March of 2009 to April of 2012, BDFS “recommended nontraditional ETFs to more than 200 customers” without “a reasonable basis for believing that the nontraditional ETF transactions it recommended were suitable for any investor.”  BDFS’s ETF related misconduct was said to have violated NASD Rules 2310 and 3010 along with FINRA Rules 2010 and 2111.

Traditional ETFs are similar to mutual funds in that they are typically designed to offer returns by tracking an index like the S&P 500 or Dow Jones.  Unlike mutual funds, ETFs trade on an exchange like stocks and typically have lower fees and higher liquidity.

Nontraditional or Leveraged ETFs are complex products and differ from traditional ETFs in that they endeavor to return multiples of a given index’s return – typically double or triple the return – or the inverse of a given index’s return, or both.  For example, a double leveraged “bear” S&P 500 ETF would be designed to return twice the opposite of the S&P 500’s performance.  So if the S&P 500 went down 1, the ETF would (in theory) go up 2, and vice versa.

Because nontraditional ETFs use derivatives such as swaps and futures contracts to achieve their desired performance, they can be especially risky.  The features of nontraditional ETFs more often than not make them useful only to speculative day-traders and completely unsuitable as “buy and hold” investments for average “mom and pop” investors.

Given that nontraditional ETFs can be so dangerous for the average investor, proper supervision by the selling broker-dealer, like BDFS, is critical to ensure that “mom and pop” are not the ones buying them as long term investments in their accounts.  When firms fail at conducting the proper due diligence and supervision, their customers can suffer crushing losses in their accounts as a result.

Examples of nontraditional ETFs that are usually not appropriate for average investors yet improperly sold to them anyway are:

Direxion Daily Nat Gas Rltd Bull 3X                            GASL

Direxion Daily Jr Gld Mnrs Bull 3X                             JNUG

Direxion Daily Brazil Bull 3X                                         BRZU

Direxion Daily Gold Miners Bull 3X                             NUGT

Direxion Daily Russia Bull 3X                                        RUSL

Direxion Daily Latin America Bull 3X                          LBJ

ProShares Ultra MSCI Brazil Capped                          UBR

Direxion Daily Energy Bull 3X                                      ERX

ProShares Ultra Oil & Gas                                              DIG

ProShares Ultra MSCI Mexico Capped IMI               UMX

Direxion Daily FTSE Europe Bull 3X                          EURL

Direxion Daily South Korea Bull 3X                            KORU

ProShares Ultra FTSE Europe                                      UPV

Direxion Daily Dev Mkts Bull 3X                                  DZK

Direxion Daily Emrg Mkts Bull 3X                               EDC

ProShares Ultra MSCI EAFE                                         EFO

ProShares Ultra MSCI Emerging Markets                 EET

If you or a family member invested in nontraditional ETFs such as those listed above or others, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

It is the right of any and all investors who believe they may have suffered losses as a result of recommendations of their financial advisor to contact our offices to explore their legal rights and options.  The attorneys at Malecki Law have extensive experience representing investors.

 

 

The Financial Industry Regulatory Authority (FINRA) has permanently barred Nicholas Hansen Harper.  Harper worked in Wells Fargo’s Topeka, Kansas branch office from 1997 through 2013 according to his BrokerCheck Report.

Per the Letter of Acceptance Waiver and Consent filed with FINRA, Harper resigned from Wells Fargo on August 7, 2013, shortly after the firm’s compliance department began to review trading in the accounts of certain of his customers.  The timing of Harper’s resignation can only serve to raise suspicions.

Presumably suspicious of Harper, in March of 2015, FINRA requested Harper provide testimony to FINRA investigators pursuant to Rule 8210.   More than one month after the request was issues, FINRA staff spoke to Harper’s attorney, who purportedly indicated that Harper would not be appearing before FINRA to provide testimony at any time.

In response to his violation of FINRA Rule 8210, Harper has agreed to a bar from association with any FINRA member in any capacity.

FINRA investigations are serious matters and for that reason Rule 8210 provides FINRA with a “big stick” to force compliance from registered representatives.

For Harper, this has already become something future employers and clients, alike, in any business can see.  This can affect future employment possibilities, future licensing and the ability to get financing for personal and/or business endeavors.  For a registered person receiving an 8210 request, proper handling of these matters by experienced counsel is essential.

FINRA is one of the few regulators that specifically oversee the securities industry.  Because of that, FINRA’s enforcement division is a crucial part of preventing investment fraud and punishing those who have committed violations.

In addition to the state and federal laws that are on the books, the securities industry is also governed by industry rules promulgated by the Securities and Exchange Commission and FINRA.   These rules, including Rule 8210, are important and must be complied with.

Failure to comply with FINRA and SEC rules can expose a person to civil liability and loss of professional licenses, as in the case of Nicholas Harper.  If a licensed stockbroker or financial advisor has broken the rules with respect to a customer account, that customer could be entitled to recover their losses.

Malecki Law has handled numerous cases stemming from inappropriate trading by brokers in customer accounts.  If you or a family member invested with Nicholas Harper or Wells Fargo and have lost money, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

What should happen to a financial advisor (FA) if they provide unsuitable and inappropriate investment advice to their clients?

First, if the unsuitable advice given to a customer caused losses to that customer’s account, the customer has the option to sue the FA in FINRA arbitration.  Investors can recover some or all of their losses due to the bad advice – usually against the firm that the FA worked for in a failure to supervise case.  Arbitration is common for aggrieved investors, and this law firm has successfully represented numerous investors who have been the victims of unsuitable investment advice from an FA.

But what about punishing the broker, so he or she doesn’t do it again to someone else?  Can they go to jail? If not, what does happens?

In some more extreme cases, the FA may have committed a crime and may be prosecuted. However, these cases are in the significant minority.  More often, the FA is pursued by a financial industry regulator – usually the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA), but in some cases it could be a state regulator.

These regulators have the power to suspend an FA’s license to sell securities, fine the FA or both.  The regulators also have the ability to punish the firms that employed the FA for failing to supervise the FA properly.

Just yesterday, InvestmentNews reported that FINRA would be toughening its sanctions against firms and FAs for suitability violations.  According to the article, FINRA will be “tightening the screws on its disciplinary responses” against FAs including increasing its suggested suspensions from one year to two years and the potential for barring FAs and firms that commit fraud.  This announcement comes on the heels of a Department of Labor proposal to impose a fiduciary duty upon FAs when dealing with investment accounts – meaning the FA would have to act in his or her client’s best interest.

Ultimately, steps taken in favor of investor protection whether by the DOL, FINRA or otherwise are steps taken in the right direction.

It is the right of any and all investors who believe they may have suffered losses as a result of unsuitable recommendations of their financial advisor to contact our offices to explore their legal rights and options.  Contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.