Articles Posted in This Week At Malecki Law

Malecki Law is pleased to announce that Ms. Jacqueline Candella has joined Malecki Law as its new associate securities attorney in New York. Ms. Candella is a recent graduate of the New York Law School yet brings with her an impressive background in the securities and financial industry.

Ms. Candella received her Juris Doctor from Ms. Malecki’s Alma Matter New York Law School (NYLS), having also completed an undergraduate degree in Finance from Pace University. Prior to law school, Ms. Candella served as a client associate for Merrill Lynch – Bank of America’s Wealth Management Department, providing risk assessments, financial analysis, research, and account management support for high-net worth investors.

While in law school, Ms. Candella served as an extern in the Enforcement Division of the Financial Regulatory Authority (FINRA), where she assisted in the investigation of member firms and associated persons for violations of federal securities laws and industry rules.  She provided a wide range of support functions for FINRA’s enforcement attorneys, including research and drafting on legal issues. Ms. Candella also participated in interviews with registered representatives and worked on Form U4 and U5 registration issues. In a separate internship, Ms. Candella gained relevant law firm and litigation experience, performing significant work on customer arbitrations and mediations through NYLS’s Field Placement office.

Today at 1:00 PM, NYC FINRA arbitration lawyer Jenice L. Malecki, Esq. will be presenting at a year-in-review webinar hosted by the defense firm Bressler, Amery & Ross, entitled A Recap of 2021 Virtual Proceedings 2nd Annual Hearings in Review.  There is still time to attend and register for the event, which is open to securities attorneys and securities industry professionals. Continuing Legal Education (CLE) credits are approved for attorneys licensed in New York and Pennsylvania, with reciprocity for New Jersey, Florida, and California.  CLE approval has also been applied for and is pending for credit in North Carolina, Alabama, and Texas.

Other presenters at the event include other securities attorneys, including Richard Berry, Director of Dispute Resolution at the Financial Industry Regulatory Authority (FINRA). The event reviews the increase in virtual arbitration hearings throughout 2020 and 2021 owing to the Covid-19 pandemic, providing outcome statistics and the ongoing trend for virtual proceedings in FINRA customer and industry arbitrations. FINRA has long provided technology and support for virtual arbitration hearings primarily via Zoom and many trial attorneys opted for virtual hearings to avoid Covid-related backlog delays and to ensure their clients received a timely hearing.  Practitioners and arbitrators have become so used to using the trial platform that it deserves proper study regarding fair case outcomes if the practice is to continue – for the foreseeable future, virtual proceedings at FINRA appear here to stay.  The webinar will review practice tips, techniques, and resources for conducting effective virtual trials, best practices for presenting evidence, developing a plan for technology failures, and how the experience compares to in-person civil trials.

Ms. Malecki is a regular presenter and panelist at securities industry events.  As a renowned and skilled litigator in both courts and arbitration, Ms. Malecki has been featured regularly in the media and has published numerous articles to advance diversity and financial elder abuse issues within the securities litigation field.  She is known for her nearly thirty-five years of securities industry practice and is the founder and principal of Malecki Law, a FINRA Arbitration Law Firm that has been based in New York City’s financial district for over twenty years. Ms. Malecki is a former board member of FINRA and member of its National Arbitration and Mediation Committee (NAMC).  She is presently the co-chair of the New York State Bar Association’s Securities Arbitration Committee, as well as an adjunct professor in the securities clinic at the New York Law School.

Weighing in on all things financial services, top securities industry lawyer, Jenice L. Malecki, commented on two matters going on at the Financial Industry Regulatory Authority (FINRA).

First, under fire again, it looks like another FINRA arbitration is poised for potential vacatur because of the conduct of an over-reaching, advocatory-styled arbitrator who would not give a customer their day in court.  A Florida state court is now entertaining a case where the Alabama Securities Commission is seeking to vacate an award that granted expungement of customer complaints from a UBS broker’s record.

Ms. Malecki discussed with Financial Planning Magazine how this is not only bad for the customer, but also bad for the broker.  It taints the proceedings and runs up the bills unnecessarily.  Moreover, this broker will also now have a hotly contested court case on his record when all he did was follow FINRA’s rules.  The broker did not exclude the client, the arbitrator did.  There needs to be  a stronger and better monitored process at FINRA for the sake of all interested parties, as well as stronger monitoring of that process by FINRA – not just letting arbitrators act like self-appointed judges without oversight.  Even the best judges in the world are subject to oversight, but FINRA arbitrators are not.  The scenario presented is not shocking.  It was just a matter of time before something like this happened, and FINRA should have seen this coming for years.

The Public Investors Advocate Bar Association (PIABA) will be welcoming back the organization’s former board member, Jenice Malecki, as a moderator for its Mid-Year Meeting and one-day continuing legal education (CLE) program entitled Getting Grandma’s Nest Egg Back.  The program kicks off on April 21, 2022, from 12 PM to 6 PM, and will be held via Zoom for registered participants.  The CLE program is designed for securities arbitration practitioners, including attorneys, experts, consultants, mediators, educators, but it is also open to the general public.

Ms. Malecki will be moderating the program finale, Strategies and Techniques in Dealing with FINRA Arbitrations Involving Senior Citizens. The panel will feature securities litigator Sandra Grannum from the law firm Faegre Drinker and Professor Christine Lazaro, Director of the Securities Arbitration Clinic at St. John’s University School of Law. The experienced panel of lawyers will delve into strategies and techniques such as client and witness preparation, cross examination of brokers and registered investment advisors (RIAs), tactics commonly employed by defense firms, and what to consider in arbitration when dealing with senior citizen claims specifically.

Financial elder abuse is a topic that is near and dear to Ms. Malecki, who has long been passionate about advocating for retirees who have been taken advantage of or have lost their retirement savings owing to brokerage firms and financial professionals who did not properly manage or supervise their retirement accounts.  For nearly 30 years, Ms. Malecki has successfully brought numerous lawsuits on behalf of seniors and retirees who have lost their financial nest eggs, recovering tens of millions of investment dollars on their behalf.

Next week, the New York State Bar Association’s Securities Arbitration Committee will be hosting a timely conversation on the future of mandatory arbitration.  For the last 35 years, retail investors seeking recovery of stock market investment losses have had no other choice but to arbitrate their disputes at the Financial Industry Regulatory Authority (FINRA).  Prior to 1987, investors were able to bring lawsuits in the courts, but that all changed with the landmark U.S. Supreme Court case, Shearson/American Express v. McMahon, 483 U.S. 1056 (1987).  Moderating this event is Jenice L. Malecki, principal and founder of Malecki Law, and also the Co-Chair of the Securities Arbitration Committee.  She has been on FINRA’s National Arbitration and Mediation Committee, on the board of the Public Investors Advocate Bar Association (PIABA), and is an Adjunct Professor at New York Law School.  Invited speakers to the event include Michael Edmiston, the current president of PIABA, Tracey McNeil, Ombudsman for the Securities and Exchange Commission (SEC), and Angela Turiano, counsel and principal for Bressler Amery and Ross.

The benefits of arbitration have always been the economy of the process, typically involving less costs and faster recovery times than court. Compared to courts, arbitrations further allow very limited grounds for appeal. Arbitrators also have wider latitude than judges to grant relief to investors based on principles of equity and fairness – i.e., not necessarily having to adhere to legal precedent of earlier court decisions. This is a double-edged sword, however, because the potential downside is that arbitrators, who are under no obligation to explain their awards, have similar latitude to depart from substantive law to the detriment of the investor. The speed and economy of the arbitration process has also come under scrutiny, especially with the Covid-19 backlog of in-person arbitration hearings at FINRA.  The fairness of the process has also long been criticized in terms of the quality of the arbitrators and the “neutral” arbitrator selection process managed by FINRA.

What makes this event particularly timely is the very recent news out of a Georgia state court decision, which overturned and vacated an arbitrator award that denied investor claims in favor of the prevailing firm, Wells Fargo. The court made this rare reversal of an arbitration award because, in the court’s determination, Wells Fargo allegedly had an undisclosed “side agreement” with FINRA to exclude certain arbitrators considered to be “investor friendly.” The court agreed with the investor’s position that this side agreement created a bias against the investor because “[p]ermitting one lawyer to secretly red line the neutral list makes the list anything but neutral, and calls into question the entire fairness of the arbitral forum.” Brian Leggett and Bryson Holdings, LLC vs. Wells Fargo Clearing Services, LLC et al., File No. 2019CV328949, Superior Court of Georgia, Fulton County (January 25, 2022). The news of this decision has intensified pressure on FINRA to not only investigate the matter, but to possibly reform the arbitration process, something that has long been called for by members of Congress and investor advocate organizations like PIABA.

Yesterday, Malecki Law filed its official response to FINRA’s proposed changes to FINRA Rule 3240, in which FINRA seeks to modify the five current exceptions to the general rule that prohibits any “registered person” with a brokerage firm, from borrowing or lending to their customers. The rule applies to registered persons, which is most typically the account’s stockbroker, but applies to any licensed person with the firm. While FINRA has proposed this rule to “narrow the scope” of certain exceptions to the rule, Malecki Law filed its comment because of concerns that some of the modifications do not go far enough and still leaves room for possible abuse of the customer.

The five existing exceptions that currently permit borrowing or lending arrangements with a customer under Rule 3240 are if the customer is (1) a member of the registered person’s immediate family; (2) if the customer is a financial institution; (3) if the customer is also a registered person with the same firm; (4) if the lending arrangement is based on a personal relationship with the customer such that the arrangement would not exist had the personal relationship not existed in the first place; and (5) if the lending arrangements is based on a business relationship external to the broker-customer relationship.

Malecki Law is in favor of Rule 3240’s general prohibition against borrowing or lending to customers, because, as noted in Malecki Law’s filed comment, “there are thousands of brokers and advisors in America,” and therefore plenty “available to take over the debtor or lender’s investment account until the loan is repaid.” So while we support any proposal that narrows the rule, we believe that the inherent conflicts of interest in allowing such arrangements, even with a narrowed set of exceptions, could be entirely avoided in the first place.

Jenice L. Malecki, Esq., founder of the New York City securities law firm Malecki Law, is scheduled to speak this Friday November 19th at the American Bar Association’s Women in Litigation Joint CLE Conference. The conference is scheduled November 17-19, 2021 at the Boston Park Plaza in Boston, Massachusetts.  The conference highlights leading women litigators in a number of legal areas, with Ms. Malecki invited to speak on FINRA expungement matters, defamation lawsuits, and wrongful terminations relating to employment arbitrations litigated in FINRA’s dispute resolution forum.

For the last thirty years, Ms. Malecki has been an industry trailblazer as a leading female litigator in securities matters, having represented throughout her career a cross section of retail investors, brokerage firms, and employees within the securities industry. The breadth of Ms. Malecki’s experience and success is atypical in the legal profession, and particularly in securities litigation, because the field has been traditionally male dominated. She is an adjunct securities law professor at the New York Law School and has published scholarly works on women’s issues in the law, amongst numerous other securities-related topics.  Earlier this year, Ms. Malecki authored a paper published in the Public Investors Advocate Bar Association (PIABA) Bar Journal, Vol. 28, No. 1, entitled Minorities and Women in the Securities Industry:  The Disproportionate Impact of Securities Fraud Exploitation.  Ms. Malecki was also a panelist at last year’s PIABA Annual Meeting and Securities Law Seminar where she spoke on the issue of Women Lawyers, Arbitrators, and Expert Witnesses.

Ms. Malecki is an ex-vice president of PIABA and sat on the advisory board for FINRA’s National Arbitration and Mediation Committee.  She was recently appointed in September of this year as co-chair of the New York State Bar Association’s (NYSBA) Commercial & Federal Litigation Section’s Securities Arbitration Committee.  The committee recognizes Ms. Malecki’s experience in the securities arena with the goal of promoting healthy industry relationships between litigators, administrative bodies, and the courts.

Yesterday, a writer for The Inter-Mountain, a West Virginia daily newspaper, published a warning from its state attorney general, Patrick Morrissey, that residents should be careful “not to fall prey to faith-based scams.”  The article does not discuss any specific scam but quotes a general press release from Mr. Morrissey’s office regarding “affinity frauds,” where victims of financial scams are targeted through their common bond, often a religious community.  The article is notable in part because it quotes Jenice L. Malecki, a New York securities lawyer from Malecki Law, who has been featured frequently in the media and on CNBC’s American Greed, where she explained how people in these communities fall victim by letting their guard down “[e]specially in affinity situations, where people feel more comfortable for one reason or another, be it a church or an ethnic community, they tend not to look as hard as they should at what’s in front of them.”

While Mr. Morrissey’s warning is important and discusses the threat of scammers from outside the community, investors should additionally be aware that victims of affinity frauds are often victimized directly by someone prominent within the community itself, often the leader or pastor of the community.  For instance, the warning focuses on scams where such a leader is impersonated by someone from outside the community, where scammers “have hacked a minister’s or faith -based charity’s online account, then emailed” its victims to ask for money.  Further illustrating this, the warning states that “Scammers may claim the pastor is stuck or overseas and needs gift cards sent to get home, or they could solicit funds for a project.”  The SEC, however, emphasized the threat more broadly in a 2013 publication where it warned on affinity frauds how the “fraudsters who promote affinity scams frequently are – or pretend to be – members of the group.” The SEC also noted that “many affinity scams involve ‘Ponzi’ or pyramid schemes, where new investor money used to make payments to earlier investors to give the false illusion that the investment is successful.”

So investors should be aware that fraudulent schemes can come from both within the group (i.e., community leaders themselves) as well as outside the group.  Ponzi schemes are still highly prevalent, and investors should be on alert and watch their investments carefully.  Malecki Law has recovered millions of dollars for investors across numerous types of frauds and Ponzi schemes, including her famous representation of over 120 victims from the Bronx, New York, in the Robert Van Zandt Ponzi scheme, as well as successful, multi-million dollar recoveries in other schemes involving the imprisoned Hector May, and the Biscayne Capital fraud that victimized Latin American investors of over $155 million.  Most recently, the firm filed an action against the brokerage firm Henley & Company on behalf of an investor who was victimized by the late Ponzi schemer Phil Incorvia.  The lawsuit against Henley alleges that the firm effectively allowed the scheme to flourish for the last 15 years because Henley allegedly failed to properly supervise Mr. Incorvia and the office he worked out of since 2006.

Malecki Law is currently representing clients and investigating allegations against the brokerage and investment advisory firm Henley & Company, LLC and its recently deceased financial adviser, Philip Incorvia.  Public records show Mr. Incorvia openly and notoriously operated Jefferson Resources Inc. since 1992 (nearly 30 years, while being registered as a FINRA Series 7 licensed broker with Henley & Company – using Henley & Company as the website address for the company).  Mr. Incorvia was employed approximately 15 years with Henley and Company, operating both out of its offices in Shoreham and Uniondale, New York.  Malecki Law is looking for whistleblowers, witnesses, and other victims.

Malecki Law’s investigation relates to a possible Ponzi scheme and/or misappropriation of funds involving many investors and potentially many millions of dollars in losses.  The losses occurred across a number of purported “investments,” including but not limited to Jefferson Resources Inc., Vanderbilt Realty Investors, Inc., and JRI Hedge Fund. The investments were purporting to be mutual funds, hedge funds, and index funds, but it is believed that they were fictitious.  Some were “income producing” while others rolled over.

A Ponzi scheme is a fictitious investment or scam, in which the Ponzi operator typically uses investor money for personal use and non-investment related purposes.  Earlier investors are typically given “returns” which consist of principal coming from newer investors.  Ponzi schemes tend to collapse when there are no more new investors to tap into, which often happens during adverse market conditions.  In this case, it is believed that there was no one left to continue the Ponzi scheme when Mr. Incorvia passed away in August 2012, so it collapsed.

Jenice L. Malecki, Esq., founder of Malecki Law in 1999, was appointed today as co-chair of the New York State Bar Association Commercial & Federal Litigation Section’s Securities Arbitration Committee.  Ms. Malecki has over 30 years of experience in securities arbitration and regulation, as well as whistleblowing claims and commercial arbitration and litigation. Having also been appointed to the FINRA board advisory group called the National Arbitration and Mediation Committee, as well as having been on the board of the Public Investors Arbitration Bar Association board, Ms. Malecki is uniquely qualified to lead this committee.  Ms. Malecki has represented clients around the country and the world, including clients from Europe, Asia, Israel, Hong Kong, Puerto Rico, Mexico and South America.  This broad representation has given Ms. Malecki in-depth expertise in arbitrations, mediations, settlements, and hearings – both live and over Zoom – as directed in court, at FINRA and before regulatory bodies.  Ms. Malecki has also worked on high profile class action cases and appeared on various media shows including but not limited to Wall Street Journal Live, ABC’s Eyewitness News and NBC’s Today Show.  All of this demonstrates Ms. Malecki’s knowledge and passion for securities work.

The New York State Bar Association (NYSBA) was founded in 1876 in an effort to cultivate and develop the law. Educating the public, as well as evolving with the changes of the legal profession, are part of the mission. The NYSBA promotes and champions equal justice through state and federal legislation. With over 70,000 members, the NYSBA attempts to nurture the science of jurisprudence while also encouraging changes in the law to effectively arbitrate justice.

Within the NYSBA, a committee was created in 1988 to continue to develop effective representation as well as encourage improvements to the law in areas of commercial and federal litigation. The committee works to foster healthy relationships between various administrative bodies, litigators, and judges to stimulate and encourage research, and collaborative thought on issues that affect commercial and federal litigation. Regulating and promoting legislation that would affect commercial and federal litigation. The extensive network will assist in providing resources for legal educational programs as well as other resources that inform on topics relevant to commercial and federal litigation.

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