Securities Arbitration

What does the SEC have planned for investment advisers and brokers dealers? The Securities and Exchange Commission ("SEC") recently released its list of examination priorities for 2017. In particular, the SEC will be focusing on three areas: matters of importance to retail investors, risks to elderly and retiring investors, and market-wide risks. There are 21 areas of focus on this year's list, including: Money market funds Representatives and employers with prior records of

In December 2016, UBS lost an $18.5 million arbitration brought by two former clients, a husband and wife, in connection with the sale of close-end funds that were collateralized by Puerto Rican bonds. The controversy arose in the wake of the collapse of the island nation's bond market in 2013 during which time UBS allegedly increased the local demand for the bonds artificially and misled the clients about the potential risks associated with the investments. In 2014, the cou

On January 13, 2017, the United States Supreme Court agreed to consider whether, under American Pipe & Construction Co. v. Utah , 414 U.S. 538 (1974) (“ American Pipe ”), the filing of a securities class action lawsuit tolls the statute of repose found in Section 13 of the Securities Act of 1933 (the “Act”).  In American Pipe , the Court held that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who wou

What is the fate of the fiduciary rule under the Trump Administration? In May of last year, this Blog wrote about the Department of Labor's fiduciary rule, which requires financial advisors to put their clients' interests first when making investment recommendations for retirement accounts, such as 401(k)s and IRAs. The rule, designed to prevent conflicts of interest, has strong support from the Obama administration and investor advocates who argue that inappropriate recomme

What anti-money laundering compliance programs should financial firms have in place? The Financial Industry Regulatory Authority ("FINRA") recently announced that it had fined Credit Suisse Securities (USA) LLC, a former unit of Credit Suisse AG, $16.5 million for anti-money laundering ("AML"), supervision, and other violations. The self-regulatory watchdog found that the firm's monitoring program for detecting suspicious activity was deficient in two material ways. First,

In a December 2016 regulatory notice to member firms, the Financial Industry Regulatory Authority (“FINRA”) announced that the Securities and Exchange Commission (“SEC”) approved amendments to Rule 12403 of the Code of Arbitration Procedure for Customer Disputes. The amended rule will increase (1) the number of arbitrators on the public arbitrator list that FINRA sends to parties during the panel selection process from 10 to 15, and (2) the number of strikes to the public ar

Previously, this Blog wrote about the importance of having a complete record when challenging an arbitration award.  Recently, two claimants in arbitration learned the hard way that an incomplete record will not support vacatur of an award.  See Abbott vs. RBC Dain Rauscher Inc. , No. 1-15-1612, 2016 IL App. (1st) 151612-U (Ill. App., 1Dist., 9/29/16). The Arbitration P roceeding: David James and Michael Abbott (“Plaintiffs”) filed a claim in arbitration against RBC Dain R

The Securities and Exchange Commission (“SEC”) will tell anyone who listens that reporting violations of the securities laws is an important part of its anti-fraud/anti-corruption whistleblower program.  This is especially so when the violations are difficult to detect.  For this reason, among others, the SEC has encouraged company insiders with knowledge of wrongdoing to come forward with information about the violations. The carrot used to encourage such whistleblowing is

Arbitration is an alternative form of dispute resolution, meaning it is an alternative to a court proceeding. In arbitration, the parties have their dispute resolved by neutral persons (known as arbitrators) knowledgeable in the areas in dispute, rather than by a judge or jury. Arbitration has been a form of dispute resolution within the securities industry for many years, primarily because it is generally considered to be faster, inexpensive and less complex than litigation

What is the amount of fines assessed by Finra this year? Thus far, 2016 has been a banner year for the Financial Industry Regulatory Authority ("FINRA"). Buoyed in part by a handful of large penalties, the self-regulatory watchdog is on pace for a record year as fines could be up by 70 percent when all is said and done. In the first six months of this year, FINRA assessed $79.4 million in fines against member broker-dealers. For the similar period in 2015 that figure was $37.

The Financial Industry Regulatory Authority ("FINRA") recently announced that the new Capital Acquisition Broker ("CAB") Rules will become effective April 14, 2017. While CABs still must be registered with the Securities and Exchange Commission, they will be subjected to a reduced series of FINRA rules and compliance obligations. Capital Acquisition Brokers at a Glance Capital Acquisition Brokers are those involved in private placements and mergers and acquisitions involving

On November 4, 2016, a judge sitting in the United States District Court for the District of Columbia upheld the Department of Labor’s (“DOL”) fiduciary duty rules that were adopted to curtail conflicts of interest by financial advisors providing investment recommendations for retirement accounts.  In a 92-page ruling, Judge Randolph Moss rejected arguments that the new rules would have “catastrophic consequences” for the fixed indexed annuities industry, that the DOL exceede

On October 25, 2016, the Appellate Division, First Department issued a unanimous decision addressing the protection of confidential information.  In BitSight Technologies, Inc. v. SecurityScorecard, Inc. , 2016 NY Slip Op. 06980, the Court reversed the decision of the motion court, holding that “ hen a party sells information to with the requirement that the latter keep the information confidential, the information is still protected.” The Facts: The action arose from a Marc

On November 3, 2016, the Appellate Division, First Department revived a case against J.P. Morgan Securities LLC and JPMorgan Chase & Co., the parent company of Bear Stearns & Co. Inc. (“Bear Stearns”), that had been dismissed over losses that the plaintiff, Aozora Bank, Ltd. (“Aozora”), a Japanese lender, suffered after investing in collateralized debt obligations (“CDOs”) it claims Bears Stearns used as a “dumping ground” for its most toxic, risky assets. In Aozora Bank, Ltd

On October 20, 2016, the Financial Industry Regulatory Authority (“FINRA”) announced that it had submitted proposed rule changes to the Securities Exchange Commission (“SEC”) for approval that are intended to help member firms detect and prevent the abuse and financial exploitation of senior and vulnerable adult customers.  If approved, the proposed rules would allow member firms to temporarily halt the disbursement of funds or securities from their customers’ accounts if th

On October 3, 2016, the United States Supreme Court invited the U.S. Solicitor General to express the U.S. Government’s views about the application of the False Claims Act (“FCA”) public disclosure bar. 31 U.S.C. § 3730(e)(4)(A).  The request was made in the United States ex rel. Advocates for Basic Legal Equality v. U.S. Bank , a qui tam action that the Sixth Circuit held was properly dismissed because of the public disclosure bar. In United States ex rel. Advocates for Ba

Today’s newspapers often report stories about the perils of arbitration. In 2015, for example, The New York Times published a series of articles titled, “Beware the Fine Print” – a special report examining how arbitration clauses buried in contracts deprives Americans of their constitutional rights. (Silver-Greenberg & Corkery , In Arbitration, a Privatization of the Justice System , N.Y. Times (Nov. 1, 2015).) According to the California Assembly Committee On Judiciary, an

What type of fraud is Laurence Balter accused of? Laurence Balter, a former fund adviser and registered investment advisor, stands accused by the Securities and Exchange Commission ("SEC") of "multiple breaches of fiduciary duty." Breaches of fiduciary duty occur when financial advisers prioritize their own interests over those of their clients. The SEC accuses Balter, who was operating through Oracle Investment, located in Washington and Hawaii, of collecting more than $500

On September 29, 2016, the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) announced that Och-Ziff Capital Management Group LLC (“Och-Ziff”), a New York-based alternative investment and hedge fund manager, and OZ Africa Management GP LLC (“OZ Africa”), its wholly-owned subsidiary, agreed to pay more than $400 million to settle charges that they used intermediaries and business partners to bribe officials of various African governments. The SEC

It is a fact of life that many securities brokers and financial advisors will be the subject of one or more customer complaints during his/her career. To be sure, some of those complaints will be justified. However, many of them will not be. In those latter instances, innocent brokers and financial advisors will have a blemish on his/her record that can be cleared only through an expungement proceeding. Expungement is essentially a three-step procedure. First, the broker or