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Securities Fraud

31 May
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FINRA Slaps LPL with Largest Fine Ever for E-mail Issues

Posted by Starr Austen
in Securities Fraud

According to a report in a recent edition of Investment News, the Financial Industry Regulatory Authority (FINRA) fined LPL Financial LLC $7.5 million for 35 significant e-mail system failures. representing the inadequate oversight of 28 million e-mails over a four-year period. FINRA also ordered LPL to set up a $1.5 million fund to compensate brokerage customers who might have been affected by its inadequate e-mail oversight. Spokeswoman for the agency, Michelle Ong, said this is the largest fine FINRA has imposed for an e-mail case. The problems with LPL’s e-mails occurred from 2007 to 2013, and its systems failed more than at 35...

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29 May
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Five Independent Broker Dealers Reach $7M Settlement with Massachusetts

Posted by Starr Austen
in Securities Fraud

The Secretary of the Commonwealth of Massachusetts, William Gavin, recently announced settlements with five leading independent broker-dealers regarding sales of non-traded real estate investment trusts (REIT). A recent edition of Investment News reports that the five firms were ordered to make $6.1 million in restitution to investors and pay fines totaling $975,000. Ameriprise Financial Services Inc. faces $2.6 million in restitution and a fine of $400,000; Commonwealth Financial Network will pay $2.1 million in restitution and a $300,000 fine; Royal Alliance Associates Inc. is charged with $59,000 in restitution and a $25,000 fine; Securities America Inc. will pay $778,000 in restitution and...

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24 May
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Schwab clients may now file class-action suits

Posted by Starr Austen
in Securities Fraud

A recent article in Investment News reports that effective May 15, Charles Schwab Corp. will temporarily modify account agreements to eliminate language that prevents customers from filing class-action lawsuits. The company said that while it believes dispute resolution is best handled via arbitration, it has chosen to remove the waiver until the issue is resolved by the appropriate regulatory and/or court decisions. Schwab decided to be proactive because the arbitration decision will likely take considerable time to resolve and may leave clients with a degree of uncertainty until the legal and regulatory process is completed. Last year, the Financial Industry Regulatory Authority, Inc....

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27 April
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End Mandatory Arbitration Clauses, Says SEC Commissioner

Posted by Starr Austen
in Securities Fraud

A recent article in Investment News reports that state securities regulators are trying to build support among lawmakers on Capitol Hill to restrict or end the use of mandatory arbitration clauses in client contracts with brokers. In meetings with more than 40 lawmakers, about 17 members of the North American Securities Administrators Association Inc. (NASAA) made the case that investors should be allowed to go to court to settle grievances against their brokers. SEC Commissioner Luis Aguilar favors such regulation. In a statement, Mr. Aguilar expressed the belief that allowing investors to take their legal claims to court would enhance investor protection...

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26 March
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Advisers Could be Mishandling Your Assets, Says SEC

Posted by Starr Austen
in Securities Fraud

In a recent investor alert, the Securities and Exchange Commission warned that it has found significant deficiencies in the way investment advisers are handling the custody of client assets. The SEC revealed that their recent examinations unearthed custody-related problems in one third of the firms reviewed. Advisers failed to recognize that they control their clients' assets, co-mingled client, proprietary and employee assets and fell short of surprise-exam requirements. Advisers cited by the SEC had to change their custody compliance policies and procedures, modify their business practices or devote more resources to custody issues. SEC Chairman Elisse Walter notes that because safeguarding assets is...

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26 March
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Sizable Verdict Reaffirms Need for Due Diligence in Selecting Motor Carriers

Posted by Starr Austen
in Securities Fraud

A recent verdict entered against a transportation broker for negligent hiring should motivate companies to revisit their own company policies regarding the qualification and selection of motor carriers. In 2012, an Oregon jury awarded several million dollars to the family of a man who was killed by a commercial motor vehicle. The verdict in the Linhart v. Heyl Logistics case is significant because it was entered against a transportation broker for negligent hiring, and it included punitive damages. Industry insiders believe this is the first verdict in the country awarding punitive damages against a transportation broker for negligent hiring. It is one...

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26 March
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Schwab Ruling Favors Broker-dealers, Disserves Average Investors

Posted by Starr Austen
in Securities Fraud

A Financial Industry Regulatory Authority Inc. hearing panel dismissed two of three counts FINRA brought against Charles Schwab Corp. a year ago in a case involving Schwab's pre-dispute arbitration agreements. According to the panel, the language used in Schwab's customer agreements to prohibit participation in judicial class actions violates FINRA’s rules. However, FINRA may not enforce those rules because they are in conflict with the Federal Arbitration Act. This ruling means brokerage firms can potentially use arbitration agreements like Schwab’s to prohibit customers from participating in class action cases, thereby insulating themselves from liability. The panel found that Schwab violated FINRA’s rules by...

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26 March
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Older Americans Losing Big in Speculative Investments

Posted by Starr Austen
in Securities Fraud

Retirement savers across the U.S. are experiencing steep losses of their investments made in complex financial products that until a few years ago were sold only to the most sophisticated investors. The victims are among the millions of Americans whose stock portfolios and mutual funds tanked during the recent financial crisis. These investors are now searching for ways to realize better returns than what’s being offered by bank deposits and government bonds. Many of the alternate products promise higher returns and are ostensibly immune to stock market volatility. Promoted by aggressive investment advisers, these new investments are taking the form of speculative...

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25 March
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Do Cell Phone Policies Leave Companies Off the Hook?

Posted by Starr Austen
in Securities Fraud

The recent uptick of distracted driving lawsuits and hefty jury verdicts provides a lesson for companies: have a clear cell phone use policy in place and consider banning all cell phone use by employees using company vehicles. The May 2012 jury verdict in the ChatmanWilson v. Cabral case illustrates the hefty penalties being handed down.  A Texas jury awarded 37-year-old Vanice Chatman-Wilson several million dollars against Coca-Cola.  Chatman-Wilson’s vehicle was struck by a Coca-Cola company station wagon driven by Araceli Vanessa Cabral who was on a business call on her hands-free cell phone – allowed by company policy. Not only did Chatman Wilson...

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20 February
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SIFMA nudging SEC to implement uniform fiduciary standard of care

Posted by Starr Austen
in Securities Fraud

T. Timothy Ryan Jr., president and chief executive of SIFMA, told reporters he wants constructive dialogue to begin as soon as possible on this issue to eliminate current uncertainties. One of the most influential Wall Street lobbying organizations, SIFMA listed the fiduciary-duty rule as one of its top three priorities for 2013. According to Schoeff, SIFMA's openness toward a uniform standard has heartened some fiduciary advocates, who said that it shows that Wall Street is amenable to raising the bar for brokers. Schoeff points out that the Dodd-Frank financial reform law gives the SEC the authority to implement a rule that would...

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