Tag: FINRA

Federal Regulators Focus on Bad Actor Brokers

Federal Regulators Focus on Bad Actor Brokers

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U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) officials have announced that they will focus their attention on broker-dealers in high-risk areas. Both securities regulators hope to crack down on bad actor brokers – brokers who don’t act in the investor’s best interest – and are encouraging firms to help, in hopes of protecting investors.

FINRA President and CEO, Robert Cook, said of FINRA’s programs in a speech recently: “One of their most important purposes is to protect investors from bad actors: those who seek to evade regulatory requirements and harm investors for their own personal gain.”

Three Ways to Regulate Bad Actor Brokers

Cook highlighted three ways that FINRA is enforcing its regulations to protect investors from bad actor brokers, announcing that increased regulation will be done through more exams and enforcement.

Licensing and Registration

To qualify as a broker, a person must pass a series of exams that test knowledge regarding the operation of the markets, the securities industry, and its regulation. The exams are followed by a series of continuing education programs and further exams throughout the broker’s career.

In addition to passing a series of examinations, a broker must also be associated with a broker-dealer firm, which is responsible for supervising the broker. Brokerage firms also must be registered with the SEC and approved by FINRA to operate. Brokerage firms are subject to scrutiny, including a vetting process, operational requirements, and required standards for capital and supervision.

Monitoring and Examinations

For brokers and brokerage firms that meet the regulatory standards and qualifications, FINRA assigns a regulatory coordinator who oversees the firm’s business activities. Brokerage firms are assessed regularly based on core business areas, such as customer dealings, financial integrity, and operations. Non-routine examinations are triggered by customer complaints about bad actor brokers – an area where FINRA is dedicating more resources for regulation.

Discipline and Restitution

In addition to regulatory systems, FINRA has increased surveillance efforts designed to fight against potential fraud or market manipulation. Within FINRA, The Office of Fraud Detection and Market Intelligence (OFDMI) is a specialized central repository that works to gather and evaluate information about misconduct at both the broker and broker-dealer level.

In cases where actions of a firm or an individual pose harm to investors, FINRA intervenes in multiple ways – from requiring brokers to retake examinations to reporting misconduct to law enforcement agencies.

In 2016 alone, 1,434 disciplinary actions were filed against registered individual brokers and firms. And the agency has ordered some $124 million in restitution to investors who have been victims of bad actor brokers and their brokerage firms. Of course, such orders do not necessarily mean that defrauded investors are paid that money. Brokers and brokerage firms only can pay that money if they are able to do so. Many the brokers cannot make the payments and many of the brokerage firms have gone out of business and cannot make any payments to investors.

Bad Actor Broker Regulation In Question

A core issue is whether U.S. regulators and the securities industry are doing enough to protect investors. As seasoned investment fraud and stockbroker misconduct lawyers, Dimond Kaplan & Rothstein’s attorneys see many, many cases of investor abuse, so we firmly believe that regulators are not doing enough to protect investors. In fact, a recent study shows that the percentage of brokers engaged in misconduct is much higher than reported by FINRA. Perhaps the new focus by the agencies will help eliminate some of the misconduct and keep more investors safe.

Did You Lose Money with a Bad Actor Broker?

If you have been a victim of a bad actor broker or are suspicious that your broker is not acting in your best interest, you may have certain legal rights that require your immediate attention.

Call an Investment Fraud Attorney Today

If you are looking for an attorney to review your rights and options, the investment fraud lawyers at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerages firms for their wrongful actions.

With offices in Los Angeles, New York, West Palm Beach and Miami, our investment fraud attorneys represent clients nationwide and may be able to help you recover your investment losses.

Contact an attorney at Dimond Kaplan & Rothstein, P.A. today to schedule an appointment or consultation to review your rights and options.

Wells Fargo Broker Barred by FINRA Over Improper Transfers.

FINRA Barred a Wells Fargo Broker

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Wells Fargo Broker Barred by FINRA Over Improper Transfers

A former Wells Fargo broker has consented to sanctions from the Financial Industry Regulatory Authority (FINRA), banning him from the securities industry after he transferred client money to his own accounts to pay credit card bills. Scott Polish of Mentor, Ohio consented to the settlement with FINRA after admitting he made transfers from the accounts of elderly clients and used the proceeds for himself

Protect Yourself from Stockbroker Misconduct

Brokers like Scott Polish, although rare, do exist. There are several steps in an attempt to avoid becoming the victim of a similar scheme. Below are three steps that can help you avoid stockbroker misconduct.

  • Receive and Review Statements | For starters, make sure you receive and review your monthly account statements, and pay particular attention to securities purchases and sales and to withdrawals from your account. Make a point to ask questions about trades or activity that seems out of the ordinary.
  • Trade Authorization | Next, never allow your broker to make trades on your behalf without your permission. If your broker is required to obtain your permission before any trade, the likelihood of being victimized is reduced drastically.
  • Contact an Attorney | Finally, if you suspect your broker of committing fraud, consider closing your account and contacting an experienced securities fraud attorney.

Did You Invest with Wells Fargo Broker Scott Polish?

If you invested with Scott Polish or someone like him, and believe that you have been the victim of a similar kind of fraud, contact an experienced securities fraud attorney today.

Call a Securities Fraud Attorney Today
If you are looking for an attorney to review your rights and options, the securities lawyers at Dimond Kaplan & Rothstein, P.A. have recovered over $100 million from banks and brokerages firms for their wrongful actions.

With offices in Los Angeles, they have helped stockbroker fraud victims throughout Bel Air, Santa Barbara, Newport Beach and Laguna Beach.

FINRA Fines Merrill Lynch Over Customer Prices

FINRA Fines Merrill Lynch Over Customer Prices

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The Financial Industry Regulatory Authority (FINRA) announced that it has fined Merrill Lynch for failing to obtain the best price for customers involving several thousand manually executed trades. Further, the securities giant also is accused of failing to keep accurate records of those trades, among other things.

Merrill Lynch to Settle FINRA Charges

To settle the charges brought by FINRA, Merrill Lynch will pay $650,000 and a further $124,000 in restitution to customers. According to FINRA, “the firm failed to use reasonable diligence to ascertain the best inter-dealer market and failed to buy or sell in such market so that the resultant price to its customer was as favorable as possible under prevailing market conditions.”

In other words, after FINRA reviewed Merrill Lynch’s handling of customer orders for non-convertible preferred securities, it found more than 1,500 trades in which the bank could have found a better inter-dealer market for its customers. In a similar review of over-the-counter convertible securities trades, FINRA found 551 similar problematic trades.

Notwithstanding the firm’s failure to obtain the best price, FINRA found instances in which the trades were not recorded on time, had the wrong price, and failed to disclose compensation to customers. FINRA asserted that the bank did not have the proper supervisory system in place to prevent such errors from occurring.

Merrill Lynch faces Regular FINRA Fines

This is not the first time that Merrill Lynch has found itself in FINRA’s crosshairs. In November 2016, the firm paid $6.25 million to settle allegations that it failed to ensure customers were not using funds from certain lines of credit to purchase stock on margin. Merrill also paid $2.8 million over allegations that a system glitch caused more than 20 million trades to be misreported as sales from the firm’s inventory, causing millions of inaccuracies to appear in execution reports sent to FINRA as a result.

Are You a Victim of Securities Fraud?

As we have blogged about in the past, even big banks like Merrill Lynch are not impervious to either accidental or intentional misconduct. If you believe you have been the victim of a similar kind of issue from your bank or securities firm, contact an experienced securities fraud attorney today.

Call a Securities Fraud Attorney Today

If you are looking for an attorney to review your rights and options, the securities lawyers at Dimond Kaplan & Rothstein, P.A. have recovered over $100 million from banks and brokerages firms for their wrongful actions.

With offices in Los Angeles, they have helped stockbroker fraud victims throughout Santa Monica, Beverly Hills, and Hollywood.

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FINRA Fines Wells Fargo For Failing to Supervise

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In the latest string of incidents to affect Wells Fargo well known for its recent “new” account scandal, FINRA fines Wells Fargo for failing to supervise broker’s accounts. Two Wells Fargo subsidiaries have agreed to pay $1 million to settle claims that they failed to supervise brokers’ use of a reporting system, which led to questions of whether certain financial reports were sent to consumers as required.

Over a six-year period, Wells Fargo Advisors LLC and Wells Fargo Advisors Financial Network LLC reviewed only approximately 2 percent of consolidated reports detailing consumers’ financial holdings and were generated through a specific program. The subsidiaries had no way to track the content of those reports, which meant that there was no way to know if the reports ever reached their intended destination – the customer.

Consolidated reports detail consumers’ financial holdings, and are considered communications with the public, so they must be clear and accurate according to FINRA rules. The agency sent a warning in 2015 to its member brokerage firms that failing to properly monitor consolidated reports could lead to unscrupulous individuals disguising theft or cause a miscalculation or mismanagement of customer funds.

Of the roughly 2 percent of consolidated reports generated by the subsidiaries, FINRA found that only the cover sheets were reviewed, focusing on grammatical errors, contact information and the like and not the actual content contained within the report.

FINRA also alleged that the subsidiaries had no way to designate between a draft of a report and the final version thing because there was no procedure in place to mark which was which – something that should have triggered the company’s supervisory obligations.

More than 5 million consolidated reports were generated through this system from 2009 and 2015.

Call a Los Angeles Securities Fraud Attorney Today

Even big banks and their subsidiaries can and do make mistakes. As evidenced by the above. If you believe you have suffered a loss as a result of your broker or banks’ mismanagement, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles securities fraud attorney today for a consultation to discuss your rights and options.

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FINRA Targets Firm For Failed Broker Supervision

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The Financial Industry Regulatory Authority (FINRA) started disciplinary proceedings against Arizona-based First Financial Equity Corp. (FFEC) and its chief compliance officer, for failed broker supervision. In its proceedings FINRA stated that the brokerage firm had supervisory deficiencies for more than three years, including failure to monitor a representative who was suspected of charging excessive commissions.

FFEC is accused of failing to establish an adequate supervisory system, failing to establish written procedures, and failing to follow existing procedures already in place between 2010 and 2013.

One FFEC representative allegedly charged a couple nearly $68,000 in commission – had he charged the standard $35 per transaction, the total would have amounted to only $5,900. Instead, FFEC and its COO, Melissa Strouse, did not require approval for discretionary transactions or conduct monthly reviews to identify possible churning or other inappropriate behavior.

FFEC also is accused of misrepresenting its supervisory system to FINRA. Each year, brokerage firms are required to report that their supervisory procedures manuals are up to date and indicate how activities are supervised. In 2010 and 2011, FINRA stated that FFEC submitted inadequate certifications in 2010 and 2011, and failed to submit anything for 2012 and 2013.

The company is also charged with miscalculating the threshold under which some producing managers are to be held to a higher standard of supervision.

Call a Los Angeles Stockbroker Attorney Today

If you invested with First Financial Equity Corporation, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles securities fraud attorney today for a consultation to discuss your rights and options.

 

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What is Churning, and How Do I Avoid It?

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In most brokerage accounts you are charged a commission each time you buy or sell a security (stocks, bonds, etc.). Churning occurs when a stockbroker buys or sells securities in your account for the primary purpose of generating a commission, rather than because the trade makes financial sense for the investor. Doing so violates securities industry rules, brokerage firm rules, and legal obligations owed to the investor. In short, brokers churn accounts in order to put extra income in their pockets, at the expense of the investor.

The commissions generated from excessive trading can make it difficult for an investment portfolio to be profitable, and contravenes the principle that the investors’ interests should first.

According to FINRA, “A member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.”

Tips to avoid churning of your portfolio:

  • Maintain control over your portfolio and require your authorization before any transaction.
  • Review each trade confirmation and your monthly account statements and seek and independent review of your account if you see frequent buys and sells of securities.
  • Consider using a fee-based account instead of a commission-based account.

Call a Los Angeles Securities Lawyer Today

If you believe you have been a victim of churning, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities lawyer as soon as possible to discuss your rights.