Recently in Regulatory Audits & Investigations Category

Are Some Customers Paying Too Much In Fees? The SEC Cracks Down on Linkbrokers

August 15, 2014,

"Is my stockbroker charging me too much in commissions and fees?" This is a common question many investors frequently have. Unfortunately, all too often, the answer to this question is "Yes."

In fact, just yesterday, the SEC announced that it had fined a New York based broker-dealer, Linkbrokers (an affiliate of London-based ICAP), $14 million for over-charging its customers in the form of markups (and markdowns), among other things.

Markups are the difference between the lower price a broker-dealer can buy an investment for and the higher price charged to a retail customer when they buy investments directly from the broker-dealer's inventory, rather than on the open market. For example, if a broker-dealer were able to buy a stock at $10 per share and charge a retail customer $11 for that same share, the markup would be $1. Markups are common in the financial services industry, but to be acceptable, they must not be excessive and must be appropriately disclosed to the customer.

According to the SEC, from 2005 through February 2009, Linkbrokers did not properly disclose the markups and markdowns, nor were many of the markups (and markdowns) reasonable. Instead, Linkbrokers is said to have defrauded customers by claiming to charge them minimal commissions, while in fact charging them excessive markups that could be as much as 10-times what the customers believed they were paying. The SEC alleged that Linkbrokers charged markups that were as high as $228,000.

Linkbrokers also allegedly defrauded customers by using a version of a scheme known commonly as "cherry-picking." Such a scheme involves trading for both customer accounts and "house" accounts, which hold the broker-dealer's money. The cherry picker then chooses the profitable trades and assigns them to the house accounts, while dumping the losing trades into the customer accounts, causing the broker-dealer to profit and the customer to lose money.

Linkbrokers is said to have placed orders for customers to either buy or sell at a specific price, known as a "limit order," and executed such trades accordingly. However, depending on how the market moved after that point in time, Linkbrokers allegedly bought or sold those positions back into the market at a profit, which it kept for its own house accounts. They then allegedly lied to the customers, telling them that the limit orders had never been executed, causing the customers to suffer losses.

Remarkably, too many stockbrokers and investment advisers continue to charge their clients excessive fees and commissions. Such conduct is against the law and against financial industry rules. Investors who have been charged excessive fees and commissions may be entitled to a return of some or all of the commissions and fees paid in the account, along with a reimbursement for some or all of any losses that were suffered in the account as well.

If you believe that you may have been charged excessive fees or commissions on your investment account, contact an attorney at Malecki Law for a free consultation to find out if you may be entitled to recover some or all of your losses. The attorneys at Malecki Law have decades of experience representing investors.

FINRA Files LPL Financial for Failures to Supervise Alternative Investments

March 27, 2014,

LPL Financial LLC has been hit again for supervisory failures stemming from the recommendation of non-traded real estate investment trusts (REITs), as well as other illiquid investments, begging the question whether the fines are large enough to deter future bad conduct. According to a news release dated March 24, 2014, the Financial Industry Regulatory Authority (FINRA) announced that LPL Financial has been fined $950,000 for the firm's failures in supervision over alternative investments, including non-traded REITs, oil and gas partnerships, business development companies, hedge funds, managed futures and other illiquid pass-through investments.

LPL Financial submitted a Letter of Acceptance, Waiver and Consent No. 2011027170901 (AWC), in which it admitted to "fail[ing] to have a reasonable supervisory system and procedures to identify and determine whether purchases of [alternative investments] caused a customer's account to be unsuitably concentrated in Alternative Investments in contravention of LPL, prospectus or certain state suitability standards." LPL also admitted in the AWC that though it had a computer system to assist and supervision, this computer system did not consistently identify alternative investments that fell outside of the firm's suitability guidelines. Additionally, LPL stated that its written compliance and written supervisory procedures failed to achieve compliance with NASD Rule 2310 and state suitability standards.

NASD Rule 2310 has since been superseded by FINRA Rule 2111. The current rule establishes the industry standard that FINRA members and their employees must have a reasonable basis to believe their recommendations are suitable for their customers. The Rule further dictates that the firm must establish suitability for each customer by considering the customer's age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information, though this list is not exclusive.

LPL Financial's AWC was not the first time it was fined for selling non-traded REITs. In the AWC, LPL Financial disclosed that it entered into a prior settlement with the Massachusetts Securities Division wherein it consented to a $500,000 fine and approximately $2 million in restitution for the firm's role in selling such products in contravention of state rules concerning prospectus net worth, annual income requirements and state concentration limits.

Many State securities divisions limit the percentage of investors' investible assets that may be invested in such alternative investments such as REITs. Ohio, for instance, sets its concentration limit to 10%. The Ohio Division of Securities has in the past noted in a Securities Bulletin that Direct Participation Programs such as non-traded REITs involve substantial risks, including "severe restrictions on liquidity, ... upfront fees and expenses ranging between 12%-18% of the initial offering price and substantial ongoing fees thereafter,... and distributions to shareholders paid from borrowings or a return of the shareholder's investment after deducting fees paid to insiders. Broker-dealers are highly incentivized to sell these products by the 7%-10% commissions commonly charged to investors, some of the highest selling commissions of any investment product available."

Due to the very risky nature of alternative investments such as non-traded REITs, it is imperative that firms conduct appropriate suitability inquiries to determine whether a recommendation for the purchase of such a product is actually appropriate for each customer. According to FINRA Rules, it is also imperative that an investor be informed of all risks and costs associated with such an investment, though this is rarely done. If you believe you were not properly informed of the risks associated with alternative investments, or were recommended such an investment that may not be suitable for you, please contact the attorneys at Malecki Law to determine if you have a claim for damages.

Jenice Malecki Of Malecki Law Heads To Washington To Meet With Congressmen And Senators About Investor Protection

March 13, 2014,

Jenice Malecki of Malecki Law will be in Washington, D.C. tomorrow to meet with Congressmen and Senators along with others from the Public Investors Arbitration Bar Association (PIABA) to advocate for the Investor Choice Act and federal legislation to increase transparency and accountability from our financial regulators.


Ms. Malecki will be meeting with Rep. John Dingell (D-MI), Senator Kirsten Gillibrand (D-NY), Rep. Stephen Lynch (D-MA), Senator Charles Schumer (D-NY), and Rep. Blaine Luetkemeyer (R-MO).

The primary significance of the Investor Choice Act will be the elimination of pre-dispute arbitration agreements that are commonly used in broker-dealer and investment advisor contracts. These agreements force customers who sue their broker, advisor or firm to pursue their claims only in arbitration. By eliminating these agreements, customers who have a dispute with their advisor, broker, or firm will have the option of electing to sue in arbitration or go to court and have their case heard by a jury.

Talking points will include: 1) the problems with mandatory arbitration, 2) who are the people bringing claims against their brokers, financial advisors, etc., and 3) why choosing arbitration over court should be the choice of the investor, not the broker-dealer.

Ms. Malecki will also be discussing the need for more transparency among our financial regulators like the Securities and Exchange Commission (SEC) as well as the Financial Industry Regulatory Authority (FINRA).

This discussion will center around the benefits and need for the public at large to have access to information about how the securities industry is regulated and to be able to verify the fairness of FINRA's arbitration forum, with a focus on how the lack of transparency harms the investing public.

Berthel Fisher and PNC Fined In Connection With The Sale Of ETFs

February 25, 2014,

Just yesterday, FINRA announced that it has fined Iowa-based broker-dealer Berthel Fisher $775,000 for failures to adequately train and supervise brokers selling alternative investments, such as real estate investment trusts ("REITs"), and non-traditional exchange traded funds ("ETFs"), including leveraged and inverse ETFs.
In addition to REITs and ETFs, Berthel brokers also reportedly sold managed futures, oil and gas investments, equipment leasing programs and business developments companies, all while having "inadequate supervisory systems and written procedures for sales" of these investments.

Firms are required to have sufficient supervisory systems and written procedures for the sale of such investments to help ensure that these potentially risky and illiquid investments are only sold to investors for whom they are suitable and appropriate. Oftentimes, these investments are not appropriate for your average investor.

It was reported that Berthel failed to properly review for suitability and may have left investors over-concentrated, meaning that too much of the investor's savings may have been in just one investment, rather than being spread out in many different investments (i.e. diversified).

Even though these potentially very risky investments may not be appropriate for an average investor, brokers my sell them to average investors anyway because they are often "high-commission products," meaning that the broker gets paid more for selling them than he or she would for selling a more traditional investment such as a mutual fund. Some commissions paid to brokers and broker-dealers on some of these non-traditional products can be 10% or more of the total amount invested.

All in all, it has been reported that Berthel brokers recommended more than $49 million worth of nontraditional ETFs to over 1,000 clients. It is believed that these sales were sometimes not appropriate for the investor.

Unfortunately, Berthel Fisher is not alone. FINRA's fine of Berthel comes just two months after the regulator fined PNC Investments for failing to establish and maintain a satisfactory supervisory system with respect to the sale of non-traditional ETFs. The conduct for which PNC was fined was surprisingly similar to that of Berthel. Ultimately, PNC was fined $275,000 and paid restitution of more than $33,000.

If an ETF or other investment is sold to an investor, and it is not suitable for them, the investor may be able to recover for any and all losses caused by that investment.

If you believe you have lost money as a result of an investment in these or any other non-traditional investment, contact an attorney at Malecki Law for a free consultation to determine if you may be able to recover your losses.

All Eyes On The SEC After Recent Losses

February 21, 2014,

In recent weeks, attention has turned to the Securities and Exchange Commission's declining success rate when going to trial against alleged wrongdoers. Publications such as the New York Times and Wall Street Journal have run multiple articles recently about this surprising decline. Per the Wall Street Journal, the SEC's success rate has dropped to 55% since October, as opposed to the more than 75% success rate in the three consecutive years prior.

While the cases at the center of this decline were in the works well before Mary Jo White took the helm at the SEC, many are beginning to speculate how the Commission will react. Ms. White recently touted the then 80% success rate last year, citing it as a potential reason why attorneys counsel their clients to settle rather than face trial. However, this may be on the verge of changing. Emboldened by the newfound success of defendants in defending trials against the Commission, those who may find themselves in the SEC's crosshairs may begin to opt to go to trial.

Recent cases, such as the insider-trading investigation and trial of billionaire Dallas Mavericks owner, Mark Cuban, have only intensified the public interest in the Commission and the work it does to investigate violations of the securities laws.

Manhattan U.S. Attorney Preet Bharara's reported 79-0 record in securing convictions or guilty pleas in the U.S. Attorney's Office's recent crackdown on insider trading has only increased the pressure on the SEC in the public eye. While the two are not identical, to the casual observer, there may not be an apparent difference.

Complicating this situation even further is the agency's stated objective of pursuing admissions of wrongdoing in some cases, even when settling. Since this could potentially expose the defendant to liability in separate civil suits, it bears watching whether or not those against whom the SEC pursues an admission of wrongdoing choose to take their chances at trial.

If targeted individuals and companies begin to opt for trial rather than settlement, the question then may become whether or not the Commission has sufficient resources to handle the increased caseload. For those who find themselves the subject of an SEC investigation, the impact could potentially mean better settlement offers for those against whom the Commission believes its case to be less strong.

There is also the potential for the SEC to triage resources, allocating the most resources to the cases it believe have the greatest likelihood of success. If this were to happen, it could very well mean that those against whom the SEC has the weakest cases may find that their cases are dropped following some pressure by their defense attorney.

Ultimately, the SEC will have to determine how to properly strike the balance between dropping cases that it will not win, settling those that it can, and pursuing cases that are going to have a result that is worth the effort. Most importantly, the Commission will have to learn to tell the difference between the three.

The attorneys at Malecki Law have experience representing individuals in regulatory actions before the SEC as well as FINRA. 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.

I Just Got An SEC Subpoena: Now What Happens?

February 7, 2014,

The recent string of cases brought by the Securities and Exchange Commission in connection with the US Attorney's Office against members of SAC Capital for insider trading has shone a bright light on the world of SEC investigations. Though all financial professionals surely hope that they will never be involved in an SEC investigation, the truth of the matter is that many unfortunately will.

Receiving a subpoena from any government agency can be a worrisome event in anyone's life, but for a financial professional, receiving a subpoena from the Securities and Exchange Commission can be especially intimidating. More often than not, the recipient may be confused as to, "Why is the SEC contacting me?"

Individuals are typically contacted by the SEC for two reasons: 1) You are the subject of its investigation; or 2) The SEC believes you may have valuable information related to its investigation of an entity or someone else.

In either case, you may be subpoenaed to provide documents (called a subpoena "duces tecum") or to testify (called a subpoena "ad testificandum"), or both.

Subpoenas for documents are generally straightforward in that they list specific types or categories of documents that must be produced to the SEC by a specific date. To comply with the subpoena, the recipient must produce all responsive documents by the due date.

When the SEC calls individuals in to provide testimony, it will be in what is commonly referred to as an "on the record" interview (or "OTR" for short). Subpoenas for testimony will also be rather straightforward in that the recipient will know when and where they will need to appear to testify, but will typically not contain any clues as to what the testimony will be about. However, in advance of the OTR, you may be required to provide documents related to certain transactions, individuals, businesses, etc. that you will likely be questioned on in your OTR. You also may be questioned on documents or testimony provided by others.

When you receive a subpoena, the first thing you should do is contact a securities industry law firm that understands these matters. It is important to get a copy of the formal order of investigation, which will tell you some more detail about the investigation about which you have been called to testify or produce documents.

It is important to be properly prepared for responses to subpoenas, both for testimony and for documents. Now that you are involved in an investigation and potential litigation, ordinary words could have new meaning. Something that may seem harmless in an ordinary discussion could have a different meaning in a legal context - potentially exposing you to liability.

Once you have responded to subpoena and/or appeared at your OTR, the SEC may choose to formally charge you or it may determine that it will not pursue any action against you. While, the latter is certainly the preferred option, the former is certainly the most concerning. The SEC may pursue you civilly or criminally (typically through the U.S. Attorney's Office).

More often than not, individuals are pursued civilly, either in court or in an administrative proceeding before an administrative law judge. Prior to being formally charged, individuals are often given the opportunity to settle their matter and consent to certain sanctions. The more common civil sanctions usually include revocation/suspension of professional licenses (i.e. Series 7, 24, etc.), disgorgement (i.e. paying back any profits earned from the illegal conduct), and monetary fines. Criminal charges can also result in imprisonment among other penalties.

Given the magnitude of the potential penalties you may be facing, from the moment you receive an SEC subpoena, your focus needs to be on protecting yourself, your savings, your reputation, and your license(s).

To do that, the very first questions that need to be addressed are: Who is the target of the SEC's investigation? Is it definitely me? Could it be me? Is it someone I work for/with? Is it someone I did business with? Is it someone I continue to do business with?

Unfortunately, the answers to these questions are often not readily apparent. While SEC subpoenas are usually specific in what they request, they are often equally as vague with respect to the subject of the investigation and offer few clues to the untrained eye.

As a result, from the very first moment the SEC contacts you, experience can be your best ally. For most people, when they receive a subpoena from the SEC it is their first (and hopefully only) experience being subpoenaed. If you have do not have experience in dealing with the SEC, you may be unaware of protections available to you in both producing documents and when testifying. As a result, an unfortunate reality is that all too often, individuals may get themselves into more trouble by trying to handle the situation themselves.

Consulting with an experience attorney could be the best move that you make when faced with such a potentially life-changing event. Now is not the time to be penny wise and pound foolish. The attorneys at Malecki Law have experience representing individuals in regulatory actions before the SEC as well as FINRA. 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.

Jenice Malecki to Appear on Fox Business Channel

October 21, 2013,

Jenice Malecki of Malecki Law will be appearing at 10:45 am on Varney & Co. on Fox Business on Tuesday, October 22, to discuss the proposed $13 billion J.P. Morgan Chase settlement.

Ms. Malecki will be discussing whether J.P. Morgan and others should be surprised that the firm is being subjected to penalties relating to conduct that occurred at Bear Stearns and Washington Mutual, which J.P. Morgan acquired during the recent financial crisis.

Ms. Malecki will speak on central issues at the heart of the present debate such as the role of the government in these two acquisitions, including what promises, if any, were made to J.P. Morgan by government officials, as well as the overall price paid for the two companies relative to their actual value.

The role the acquisitions of these two companies played in J.P. Morgan's assent to its position as one of the largest banks in world also can not be overlooked.

Jenice Malecki to Appear on Fox Business News with Dennis Kneale

October 14, 2013,

Jenice Malecki of Malecki Law will be appearing on Fox Business News at 12pm today, speaking with Dennis Kneale about whether or not banks, such as JP Morgan, should be getting amnesty from regulators.

In the fallout from the financial crisis, banks, such as JP Morgan have seen their legal fees related to defending complaints from both customers and the SEC, along with other regulators, rise substantially. JP Morgan shocked many in the marketplace when it recently revealed that its "litigation reserve" was $23 billion, and that it had paid out roughly $8 billion in recent settlements and judgments.

In light of this revelation, some have called for amnesty to be provided to large banks, in an effort to relieve them of these substantial legal burdens and jumpstart the markets by freeing up large reserves of capital.

Unfortunately, many of these proponents overlook the value provided to the marketplace by the punitive measures imposed by the SEC and other financial market regulators.

Ms. Malecki will discuss how relieving these banks of their liabilities for past bad acts would eliminate accountability from the marketplace and only serve to embolden the bad actors in the future. Accountability is necessary for the efficient operation of the marketplace and consumer protection.

Americans cannot afford another financial crisis.

Criminal Charges Filed Against SAC Capital Adisors

August 2, 2013,

As has been widely reported, Criminal charges were filed against SAC Capital Advisors LP, with accusations that the hedge-fund firm is guilty of a decade long "scheme" of insider trading. In total, prosecutors charged SAC Capital and its business units with a total of four counts of securities fraud and one count of wire fraud. The charges come after a multiyear investigation by the FBI, prosecutors, and the SEC. The government is also accusing former SAC portfolio manager, Richard Lee, of conspiracy to commit securities fraud. The indictment comes only a short time after SAC agreed to a $616 million settlement of insider-trading charges.

Civilly, prosecutors are looking to have SAC and any of its affiliated corporate entities surrender all of their assets. SAC manages some $14 billion in assets, a majority of which does not come from outside investors.

In a separate civil action, the SEC is seeking a lifetime ban for Steven A. Cohen, who started SAC twenty-one years ago with roughly $20 million of personal funds, from managing client money. Mr. Cohen has not been charged criminally but denies any allegation of wrongdoing. Before the financial crisis of 2008, SAC held over $16 billion in assets and reportedly charged some of the highest fees in the business - 3% annually on the total investment, plus as much as 50% of whatever profits the firm generates.

This is just the latest example of the tarnishing of some of the largest and most prestigious names on Wall Street. The revelations of the past five years should serve as an indication to investors that even the most well-known financial firms and well-respected individuals at those firms are not always "doing things by the book" and can still be negligent or even perpetrate a knowing fraud. Investors should also be aware that if they find themselves the victims of a negligent financial advisor or a larger scale fraud, they may have a right to recover some or all of their losses.

Continue reading "Criminal Charges Filed Against SAC Capital Adisors" »

LPL Reportedly Under Fire From State Regulators

April 1, 2013,

The broker-dealer LPL, Linsco Private Ledger, has been in the news a lot recently - for all the wrong reasons. LPL was even recently featured in The New York Times for its frequent "tangles" with state and federal regulators.

LPL is the nation's fourth largest brokerage firm, with more than 13,000 brokers who currently service over 4 million customers. LPL attracts brokers from other brokerage firms by reportedly paying a higher percentage of the commissions generated directly to the broker - roughly 80% at LPL versus as low as 15-25% elsewhere. While this model can be very lucrative for well-minded brokers, this model can also attract deceitful brokers who do not have their clients' best interests in mind and seek to skirt the law.

LPL's network of brokers is very spread out by brokerage firm standards, with many brokers operating out of an office of only one or two individuals - versus other brokerage firms which may have up to several hundred brokers under one roof.

The law requires that LPL supervise its brokers in remote and small offices as if they were under the main office's roof. For LPL, this can make supervision over these brokers very challenging, and oftentimes ineffective. In just the past year and a half, LPL was penalized by regulators in five different states for failing to supervise its brokers properly.

Mr. William Galvin, the Massachusetts secretary of the commonwealth, indicated to the New York Times that in a recent investigation, "[w]hat we really saw was a complete lack of supervision."

Several of these investigations reportedly stem from the sale of Real Estate Investment Trusts (REITs) to unsophisticated investors. Unsophisticated investors may not be aware of the risks inherent to REIT investments such as illiquidity and substantial loss of principle. They may also not be aware that REITs generally pay a high commission to the broker and the brokerage firm who sold it.

Unscrupulous brokers may sell REITs as safe, income producing investments to unsuspecting, unsophisticated investors for whom they are not appropriate, in order to get the higher commission.

The attorneys at Malecki Law engage in securities litigation and arbitration in forums such as FINRA, where they have handled many cases involving firms' failures to supervise their registered representatives. If you believe you have lost money as a result of questionable conduct by your broker, please contact an attorney at Malecki Law to determine if you may be able to recover some or all of your losses.

Jenice Malecki to Appear Tonight on The Willis Report on Fox Business

March 26, 2013,

Jenice Malecki of Malecki Law will be appearing on Fox Business News tonight, March 26, 2013 between 6pm and 7pm.

Ms. Malecki will be appearing on The Willis Report to discuss the recent Rasmussen Reports that indicate 50 percent of Americans want the government to break up the country's big banks. The report also found that only 23 percent of Americans oppose such a breakup, with 27 percent remaining undecided.

Critics have said that the size of several US banks are a threat to the country's economy. This notion became widely known during the recent recession as "Too Big To Fail." The US Attorney General recently made a shocking revelation that some banks are even too large to even prosecute effectively.

Banks in this country have not always been as large as we have seen in recent years. Much of the growth in these banks has not necessarily been organic, but rather is the result of massive mergers and acquisitions between several banks.

In fact, shortly following the Great Depression, Congress passed the Banking Act of 1933, widely referred to as the Glass-Steagall Act, which contained four provisions that significantly limited the affiliations between commercial banks and securities firms. This act made mergers between commercial banks and investment banks very difficult, if not impossible.

However, over the 60+ years this act was in effect, its restrictions were gradually eroded. In 1999, the Glass-Steagall restrictions on banks were repealed under the Gramm-Leach-Bliley Act, and then-President Clinton publically announced that "the Glass-Steagall law is no longer appropriate."

The repeal of Glass- Steagall opened up the door for massive mergers between commercial and investment banks such as JP Morgan and Chase Bank, effectively changing the banking landscape in the United States.

Jenice Malecki to Appear on Fox Business News on March 21, 2013 at 5pm - Topic: SEC Digging Into Fund Fees

March 20, 2013,

Jenice Malecki of Malecki Law will be appearing on Fox Business News tomorrow, March 21, 2013, at 5pm.

If you have suffered losses in an investment with a hedge fund or other financial adviser, it is your right to consult with an attorney to explore your rights. Contact the securities lawyers at Malecki Law for a free consultation.

Regulators Consider High-Frequency Trading as Potentially Wash Sale Transactions

March 20, 2013,

963756_stock_trade_graph.jpgThe Wall Street Journal reported on March 18, 2013 that U.S. Regulators, including the Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA) are reviewing trading of high-frequency firms to determine if they are engaging in prohibited transactions, such as "wash" trades. The Article stated that the Regulators are reviewing records of primarily two exchanges, the CME Group, where the majority of wash trades have occurred, and the InterncontinentalExchange, Inc.

The Article identified that regulators are concerned that the exchanges do not have appropriate systems in place to identify or stop wash trades, especially in light of recent technical glitches leading to pronounced losses, including the Knight Capital Group and Facebook debacles in 2012.

Wash trades are when the same party places bids and asks for the same security, which causes there to appear increased activity in the security, which may affect its value, causing gains or losses to other investors who may be legitimately interested. In this way, a market participant manipulates the price of the security, prompting other participants to enter the market.

The Article identified that securities laws generally require a finding that the prohibited trading was intentional, although changes brought about by the Dodd-Frank Wall Street Reform and Consumer Protection Act allow the CFTC to prosecute firms that disrupt the market, even when not intentional. The Article also mentioned that FINRA officials are proposing to a legal standard to wash trades that would remove the requirement of "scienter," or a knowledge or wrongness. Such a change in the law may make it easier for regulators to enforce the laws, but may have a deterrent effect to legitimate trading strategies by firms who happen to place bets on both sides of the market, but for different reasons. In such an instance, the firm could claim that it did not intentionally enter into what could be considered a wash trade.

Regulators such as the Securities and Exchange Commission (SEC) have regularly brought investigations and enforcement proceedings against market participants for alleged wash trades or sales, as well as for other forms of perceived market manipulation.

The attorneys at Malecki Law represent individuals in regulatory investigations and enforcement actions, including those involving alleged wash trades in forums such as FINRA and before the SEC. If you believe you have become a potential witness or subject to a subpoena requesting information from a U.S. Regulator, please contact an attorney at Malecki Law to determine the most appropriate course of action to follow.

FINRA Fines Ameriprise and its Clearing Firm $750,000 For Failing to Supervise Jennifer Guelinas

March 19, 2013,

signing.jpgThe Financial Industry Regulatory Authority, (FINRA) issued a news release on March 4, 2013 announcing that it had fined Ameriprise Financing Services, Inc. and its affiliated clearing form American Enterprise Investment Services, Inc. $750,000 for failing to have reasonable supervisory systems in place to monitor wire transfer requests. In the News Release, FINRA disclosed that its investigation was related to Ameriprise's former registered representative Jennifer Guelinas, who apparently converted approximately $790,000 over four years from two of her clients by forging wire requests that paid in to accounts she controlled.

According to the News Release, Ameriprise failed to detect several "red flags," including that Ms. Guelinas submitted forged wire requests from a customer's account to an account that appeared to be under her control. FINRA further disclosed that on at least three occasions where Ameriprise initially rejected wire requests, they were then accepted on either the same day or another day after simply being resubmitted by Ms. Guelinas. The News Release stated that Ameriprise also accepted one request after it had begun to investigate Ms. Guelinas, and accepted another wire transfer request that was submitted by Guelinas after she was terminated, though the firm recognized its mistake in time before the money was accessed.

FINRA Rules require that securities firms have and enforce reasonable supervisory procedures in place to monitor each registered representative's conduct to ensure that they are acting in compliance with securities laws. According to the News Release, Ameriprise did not have adequate reasonable supervisory procedures in place. The FINRA News Release stated that Ameriprise had already paid full restitution to the two customers for losses in their accounts.

The risks of not having adequate supervisory procedures in place are well evidenced in this enforcement action by FINRA. It appears Ms. Guelinas took advantage, knowing that Ameriprise had no effective supervision in place relating to wire requests. The securities laws, interpretive materials as well as applicable case law make clear that securities firms serve as the gatekeepers to the securities industry, and are the first line in defense against securities fraud.

The attorneys at Malecki Law engage in securities litigation and arbitration in forums such as FINRA, where they have handled many cases involving firms' failures to supervise their registered representatives. If you believe you have lost money as a result of questionable conduct by your broker, please contact an attorney at Malecki Law to determine if you may be able to recover some or all of your losses.

Jenice Malecki of Malecki Law To Appear On On The American Radio News Afternoon Drive Show With Ernie & Rachel to Discuss The SEC's Current Investigation of Chesapeake Energy's Aubrey McClendon

March 1, 2013,

Jenice Malecki of Malecki Law will be appearing on the American Radio News Afternoon Drive Show with Ernie & Rachel tonight at 5:15pm est to discuss the current SEC investigation of Aubrey McClendon, Cheseapeake Energy's CEO.

Central to the investigation is a controversial program within the company that grants McClendon a share in every well drilled by Chesapeake, so long as he pays his share of the cost. Since the program began, Mr. McClendon has taken out hundreds of millions of dollars in personal loans from companies that invest in Chesapeake. This move did not sit well with shareholders.

Ms. Malecki will discuss how given McClendon's position at the publicly-traded company, the question of what was disclosed to investors, when it was disclosed, and whether there were actual conflicts of interest that disadvantaged investors, especially, whether these deals were priced to the company's advantage or disadvantage is at the heart of the current situation. If the allegations are correct, and all required information was not disclosed to investors and conflicts of interest were present, this is a fraud, plain and simple.

Ms. Malecki will also discuss McClendon's role as Chief Executive, and that by virtue of his position, he did not have the right to seize opportunities to benefit himself at the expense of investors. Situations such as this one, assuming the allegations to be true and accurate, is what tarnishes our market and kills our economy globally, a lack of honor and an inability for investors to trust corporate governance. When companies act in such fashion, as alleged, it is bad for America.