suitability

BROKER REPORT: FINRA Files Case Against Financial Advisor Richard William Martin for Recommending Non-Traditional ETFs

June 30, 2016 | Malecki Law Team

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Richard William Martin. Mr. Martin was most recently employed and registered from July 2009 to July 2015 with G.F. Investment Services, LLC from an office in Penang, Malaysia, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA). According to BrokerCheck records, Mr. Martin was permitted to resign amid allegations concerning FINRA’s Case No. 20150445876 which “appears to be centered around ETF trades.”

According to the FINRA Complaint, Mr. Martin violated FINRA Rules 2310 and 2111 related to suitability of recommendations by “not having a reasonable basis to recommend, for long-term holding, non-traditional exchange traded funds (‘Non-traditional ETFs’).” The FINRA Complaint details that Mr. Martin believed the world economy was “on the precipice of catastrophe and his customers should invest and hold Non-traditional ETFs to hedge against the impending catastrophe.”

The FINRA Complaint detailed that ETF shares generally represent an interest in a portfolio of securities that tracks an underlying benchmark or index, such as the S&P 500. Non-traditional ETFs differ in that they are more complex investment products that rely on strategies, such as interest rate swap agreements, futures contract, and other derivative instruments, to attempt to return a multiple and/or inverse of an underlying benchmark. This would generally make non-traditional ETFs subject to more risk, and therefore may not be suitable for certain investors.

BROKER REPORT: Financial Advisor Kenneth Daley Barred from Conducting Securities Business

June 28, 2016 | Malecki Law Team

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Kenneth Daley. Mr. Daley was employed and registered from October 2007 to June 2016 with Merrill Lynch, Pierce, Fenner & Smith, Inc., a Garden City, New York broker-dealer, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA). According to BrokerCheck records, Mr. Daley voluntarily resigned from Merrill Lynch amid allegations that he was involved in “[c]onduct involving improperly receiving money from a client via checks written from an outside account.”

Per his BrokerCheck report, prior to his employment and subsequent resignation from Merrill Lynch, Mr. Daley was employed by Wachovia Securities from 2003 to October 2007.

Subsequent to his resignation, Mr. Daley was barred from association with any FINRA member broker-dealer on June 27, 2016 by FINRA, after submitting a Letter of Acceptance, Waiver and Consent No. 2016050129701 (AWC). According to the AWC, Mr. Daley violated:

Post-Brexit Drop In The Market: Should It Raise Concerns For Investors?

June 24, 2016 | Malecki Law Team

The Dow Jones dropped more than 600 points today in response to the Brexit vote. This was reportedly the its eighth-largest point loss ever. Meanwhile, the S&P 500 dropped more than 70 points today. Certain financial company stocks dropped significantly as well. Among them were Barclays, which dropped more than 20% and RBS who saw a 27% decline. The financial sector as a whole reportedly had its worst day since 2011 dropping 5.4%.

While all of this may make the evening news more interesting to watch, the concerns on many people’s minds are undoubtedly, “How will this affect me and my portfolio?” Especially with baby-boomers retiring each and every day, retirement portfolio losses so close to one’s retirement could be unrecoverable.

One of the first things to look at to see if your portfolio was significantly affected would be to examine at your exposure to the UK and your exposure to the financial sector.

New Fiduciary Rule to Protect Retirement Investments

April 8, 2016 | Malecki Law Team

This week, it has been reported that the Department of Labor proposed tougher laws after issuing new regulations requiring financial advisors and brokers managing 401k and retirement accounts to act in the best interest of their clients. These rules were proposed a year ago and after deliberating on it for a year, the White House has finalized these tougher requirements. However, it might be a year before these rules go into effect.

An academic study commissioned by the White House revealed that “conflicts of interest” in financial investing was costing Americans about $17 billion a year in retirement savings. Although brokers are required to only recommend “suitable” investments under the current “suitability standard”, they can push a more expensive product that pays a higher commission than a cheaper fund that would be equally appropriate for that investor.

The new rule fiduciary rule is aimed to at reducing fees and commissions that erode retirement savings and hold brokers to higher standards. It will cast a wider net on who is subject to the fiduciary standard.

FINRA Bars Chicago Broker George E. Johnson Over Allegations of Fraud and Stock Manipulation

February 24, 2016 | Malecki Law Team

The Financial Industry Regulatory Authority (FINRA) has announced that it barred broker George E. Johnson from the securities industry for allegedly engaging in manipulation of stock trading, and for committing fraud. FINRA also imposed a 6-month suspension against a second broker, Joseph Mahalick, and a 2 year suspension against a supervisor, Christopher Wayne. All three individuals are reported to have worked at the time for the brokerage firm Meyers Associates, L.P. out of the firm’s Chicago, Illinois office. Mr. Johnson has been working for and was registered by Newport Coast Securities, Inc. from April 2013.

FINRA’s Order stated that during May 2012, Mr. Johnson manipulated the market for the common stock of IceWEB, Inc. (OTCBB: IWEB) by soliciting customers to buy the stock while also soliciting other customers to sell at increasingly higher and artificially inflated prices and frequently effecting matched orders among his own customers. Before and during this time, FINRA’s Order set forth that Mr. Johnson distributed to his clients misleading research and sales materials concerning IWEB, and failed to disclose material information.

The Order alleged that Mr. Johnson first became involved with IWEB when his employer acted as a placement agent for the company, and that he continued to recommend the stock to his clients through private placements and in the open market, despite the company having years of financial issues. At the time, IWEB stock was valued at around .12/share, and the Order alleged that Mr. Johnson solicited purchases and sales in the stock to artificially increase the share price to .17/share, allegedly for the purpose of earning placement agent business from IWEB to earn substantial placement fees.

FINRA’s 2016 Priorities: FINRA is Searching for Sales Practice Issues

February 11, 2016 | Malecki Law Team

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:

SEC Announces 2016 Priorities that Involve Securities Industry Participants

February 5, 2016 | Malecki Law Team

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:

FINRA FOCUS: Senior Investors

February 4, 2016 | Malecki Law Team

FINRA’s recently released Regulatory and Examinations Priority Letter made specific mention of multiple critical areas that the regulator will be focused on for the upcoming year. The one that we will focus on today is the Senior investor and the steps that are and should be taken to prevent elder abuse.

As we have discussed here before, with the growing population of senior aged investors, this demographic is becoming increasingly significant in the retail investor pool nationwide. Baby boomers are beginning to hit retirement age just as advancements in technology and medicine are leading to longer and longer lifespans.

Per 2012 census data, there are 76.4 million baby boomers which represent close to one-quarter of the then estimated U.S. population of 314 million. These figures have coupled with longer lifespans across the boards, means that there is the potential for disaster if baby boomers’ retirement savings are not properly managed. FINRA recognizes that “the consequences of unsuitable investment advice can be particularly severe for this investor group since they rarely can replenish investment portfolios with fresh funds and lack the time to make up losses.”

MainStay Cushing Master Limited Partnerships and Energy Equity Funds Post Significant Losses

February 3, 2016 | Malecki Law Team

The securities and investment fraud attorneys at Malecki Law are interested in hearing from investors in MainStay Investments’ Cushing series Master Limited Partnerships (MLPs) and Energy Equity mutual funds. MainStay Investments is a subsidiary of New York Life Insurance Company.

Among the MainStay Cushing portfolio of funds, a number of them declined between 33% and 57% in 2015 year to date, per Morningstar. These funds include:

MainStay Cushing® Royalty Energy Inc A (CURAX)

BROKER REPORT: Wells Fargo’s Gregg Lazarescu

January 26, 2016 | Malecki Law Team

The investment and securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints about Wells Fargo stockbroker Gregg D. Lazarescu.

According to his BrokerCheck report maintained by the Financial Industry Regulatory Authority (“FINRA”), Mr. Lazarescu has been the subject of at least two customer complaints while registered with his prior firm Morgan Stanley.

In addition to Wells Fargo and Morgan Stanley, FINRA reports that Mr. Lazarescu was registered with MetLife, Chemical Investment Services Corp., Citicorp Investment Services, and Chase Investment Services Corp.