Securities Arbitration

Recently, Credit Suisse (the "Bank"), the multinational financial services holding company based in Switzerland, was hit with two  class action lawsuits , one from investors over the Bank's writedown of more than $1 billion and the other from U.S.-based brokers who refused or were unable to move to Wells Fargo & Co. ("Wells Fargo") after their private banking unit was closed in 2015 .   Both lawsuits come at a time when the Bank has been in the news for legal challenges and i

The Financial Industry Regulatory Inc. ("FINRA") recently proposed establishing a roster of arbitrators specifically qualified to adjudicate expungement cases, a concept that was initially recommended by FINRA’s regulatory task force in December 2015. What is an expungement? The expungement process allows a customer complaint regarding a broker to be removed from FINRA’s online database known as BrokerCheck. By relying on arbitrators with the necessary background and training

Investing in the stock market can be challenging.  Understanding investment vehicles like stocks, bonds, limited partnerships, annuities, hedge funds, derivatives and mutual funds can be overwhelming for investors.  For that reason, many investors rely on stockbrokers and financial advisors to provide suitable investment advice to protect their hard-earned money. While most brokers and financial advisors act in their customer’s best interest, some do not.  When that happens,

Last year was a banner year for fines levied by the Financial Industry Regulatory Authority (FINRA) regarding the sale of variable annuities. In 2016, $30.3 million in fines were assessed over 30 variable annuity cases. Now, the industry watchdog is continuing its crackdown on these financial products, with an emphasis on annuity exchanges. Annuity Exchange Abuses Recently, FINRA’s enforcement unit suspended two brokers and ordered the disgorgement of more than $185,000 in co

Under Section 10 of the Federal Arbitration Act (“FAA”), a party can vacate or modify an arbitral award under four narrow circumstances: “(1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption…; (3) where the arbitrators were guilty of misconduct … or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers ….” 9 U.S.C. §10(a).  These

As noted in a prior Blog post ( here ), the Labor Department's fiduciary rule, at least the first phase of the rule, has gone into effect, though its future remains uncertain. On June 9, 2017, two provisions of the rule, which requires financial advisers and other investment professionals to act in the best interest of their clients and to disclose any potential conflicts of interest when providing retirement advice, became effective. One expands the definition of who is a fi

Yesterday, the House of Representatives voted along party lines to repeal many of the regulations enacted after the 2008 financial crisis under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). It was the first step for Republicans who have long-promised to eliminate regulations they maintain are hurting banks, restricting consumer credit, inhibiting small businesses, and slowing economic growth. The legislation faces significant hurdl

The Fiduciary Rule (the “Rule”) is designed to protect investors receiving investment advice about qualified retirement plans and individual retirement accounts (“IRAs”) by requiring all registered brokers, financial advisers, and other investment professionals (collectively, “Financial Advisors”) to act in the best interest of their clients and to disclose any potential conflicts of interest when providing retirement advice. The Rule also requires Financial Advisors who earn

On April 26, 2017, the House Financial Services Committee (the “Committee”) held a hearing, entitled “A Legislative Proposal to Create Hope and Opportunity for Investors, Consumers, and Entrepreneurs.” ( Here .) The purpose of the hearing, which lasted over three hours, was to examine the discussion draft of the “Financial CHOICE Act of 2017” (“CHOICE Act 2.0”), which was introduced by Committee Chairman Jeb Hensarling on April 19, 2017. (Discussed here .) The CHOICE Act 2.0

A FINRA arbitration panel recently awarded an investor over $1 million in compensatory and punitive damages related to claims that a Wilbank Securities Inc. broker misled her about the performance of a variable annuity. The investor alleged fraud, breach of contract, negligent supervision and breach of fiduciary duty in connection with the underperforming investment. The investor purchased the variable annuity at a Wilbanks branch in Colorado in 2008, and claims she was promi

One remedy the Securities and Exchange Commission ("SEC" or "Commission") has long relied upon in cases involving broker misconduct is disgorgement. In a nutshell, disgorgement is a remedy that requires a party who profits from illegal conduct to pay back any ill-gotten gains obtained from that conduct. On April 18, the U.S. Supreme Court heard oral argument in  Kokesh v. Securities and Exchange Commission , a case involving a New Mexico-based investment adviser who was sued

In prior posts, this Blog has written about the financial exploitation and abuse of vulnerable investors ( here and here ). The financial exploitation and abuse of vulnerable investors ( e.g. , senior citizens and the disabled) takes many forms. The most common involves: churning, unauthorized trading, unsuitable investing, over-concentrating an investor’s portfolio in a single type of investment or industry segment, and misrepresenting the risk or potential returns of an i

Financial exploitation and abuse is all too common in today’s day and age.  In fact, it is one of the fastest-growing forms of abuse of seniors and adults with disabilities. According to a recent MetLife study, titled “ Broken Trust: Elders, Family & Finances ,” about one million seniors lose an estimated $2.6 billion annually from financial exploitation and abuse. Last October, the Financial Industry Regulatory Authority (“FINRA”) announced that it had submitted proposed ru

As many investors know, the securities industry settles securities transactions ( e.g. , the purchase and sale of equities, as well as corporate and municipal bonds) on the third day after a transaction is executed by sending payment for the transaction to the seller and the securities to the buyer. This settlement cycle is known as “T+3” – shorthand for “trade date plus three days.” Prior to 1995, the financial markets operated on a longer settlement cycle – “T+5”. In 1995,

The Financial Industry Regulatory Authority, Inc. ("FINRA") has proposed a rule change that will allow broker-dealers to project the performance of investment strategies or asset allocations, but not specific stocks, in communications with clients. If approved, the new rule would put brokers on an equal footing with registered investment advisers that are currently allowed to use these projections in their communications. The self-regulatory organization ("SRO") is currentl

Last month this blog wrote about the Securities and Exchange Commission's list of exam priorities for 2017 here . Included in that list was a focus on registered representatives and employers with prior records of misconduct. This is also an exam priority for the Financial Institution's Regulatory Authority (Finra). The self regulatory organization has put in place a new exam unit that will focus on identifying high risk and recidivist brokers who pose a potential risk to in

On the same day that he signed a directive ordering a review of the Labor Department's fiduciary rule (discussed here ), President Trump signed an executive order directing the Treasury Secretary and other regulators to review existing regulations to determine whether they support six core principles. Included in those principles are: Empowering Americans to make independent financial decisions; Fostering economic growth through more rigorous regulatory impact analysis; Advan

Last month, this Blog wrote about the uncertainty surrounding implementation of the Department of Labor’s (“DOL”) fiduciary rule.  On February 3, 2017, that uncertainty was reinforced with the issuance by President Trump of a memorandum directing the DOL to determine whether the fiduciary rule should be revised or rescinded. The memorandum directs the DOL to delay the implementation date of the rule by 180 days. What is the Fiduciary Rule? The regulations in question expande

Arbitration is an alternative dispute resolution mechanism that enables parties to resolve disputes without going to court. Arbitration is similar to a trial without the formalities. It is an adversarial proceeding where the parties can call witnesses and present evidence to a neutral arbitrator or panel of arbitrators. The rules of discovery and evidence are relaxed to make it a shorter and more cost-efficient process.  An attorney or retired judge, who works for a private A

Call centers are nothing new to consumers.  Businesses, both large and small, use them to handle their telephone communications with new and existing customers. Brokerage firms also use call centers to service some of their customers – usually those customers with accounts having less than $100,000 - $200,000 in assets. Some firms use financial advisory centers (“FAC”) to provide support for a variety of administrative and customer service issues, while others use call cente