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Posts Tagged ‘Broker Dealers’

Fiduciary Duty Reform Proposal May Backtrack on Previous Rhetoric

March 2nd, 2010

Before You Invest

There is speculation this week that Senator Christopher Dodd (D-CT), will introduce new financial reform legislation that fails to create single fiduciary duty for Registered Independent Advisors (RIAs) and Broker-Dealers. This represents an expected 180?on the subject of fiduciary duty reform in light of intense lobbying efforts by the financial industry.

The provision, rather than create a single standard, calls on the Securities and Exchange Commission (SEC) to conduct a study on regulatory standards in the RIA/Broker-Dealer field, and then propose rules on the issue. The provision was first circulated by Senator Tim Johnson (D-SD), a Banking Committee member, three weeks ago.

Those in the financial industry have heard about the potential of a single fiduciary standard applying to both RIAs and broker-dealers for years, yet such talk has remained just that, talk. As quoted by Investmentnews.com, Knut A.

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Posted in Finance Fraud

Tags: Backtrack, Banking Committee, Broker Dealer, Broker Dealers, Christopher Dodd, Committee Member, Fiduciary Duty, Fiduciary Issues, Independent Advisors, Investor Protections, Reform Legislation, Reform Proposal, Regulatory Standards, Rias, Securities And Exchange Commission, Senator Christopher Dodd, Senator Tim Johnson, Straw Man, Subprime Mortgage Meltdown, Tim Johnson

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FINRA Announces Enforcement Action Relating to Reverse Convertible Notes

February 19th, 2010

Before You Invest

The Financial Industry Regulatory Authority (FINRA) recently announced an enforcement action against H&R Block Financial Advisors relating to its sale of reverse convertible notes (RCNs). RCNs usually offer an attractive yield when compared to other stocks and bonds, in part because of their highly risky nature. FINRA charged H&R Block Financial with failing to establish adequate supervisory systems and procedures for overseeing the sales of RCNs to retail investors.

In addition to the enforcement action that fined H&R Block Financial with a $200,000, FINRA also fined and suspended H&R Bock Financial broker Andrew MacGill for making unsuitable sales of RCNs to a retired couple. The couple will receive $75,000 in restitution for their investment loss.

While fining H&R Block for a failure which may well have led to multiple other investors incurring investment losses, FINRA also issued an Investor Alert titled, “Reverse Convertibles – Complex Investment Vehicles.” The goal of this alert is to educate investors on the risk associated with RCNs. Also, FINRA issued Regulatory Notice 10-09 as a reminder to broker/dealers of their obligations to clients when recommending and selling RCNs to their clients.

As stated by FINA Chairman and CEO Richard Ketchum, “Firms selling reverse convertibles [RCNs] or similar products must ensure that their brokers understand the risks and costs associated with these products and perform adequate suitability analyses before recommending them to any customer. Fimrs must also have procedures in place to monitor customer accounts for potentially unsuitable concentration levels of these products.”

The enforcement action announced today by FINRA provides hope for other investors who were not properly advised by their brokers concerning RCNs and who have likewise suffered an investment loss, much like the retired couple referenced in the current action

Posted in Finance Fraud

Tags: Broker Dealers, Concentration Levels, Convertible Notes, Customer Accounts, Fina, Financial Advisors, Financial Broker, Financial Industry Regulatory Authority, Finra, Investment Loss, Investment Losses, Investment Vehicles, Ketchum, Macgill, Regulatory Notice, Restitution, Retail Investors, Reverse Convertibles, Stocks And Bonds, Supervisory Systems

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Senator Dodd on Fiduciary Duty: Can He Withstand the Lobbyists?

January 12th, 2010

Before You Invest

After Senator Christopher Dodd’s surprise announcement last week declaring he would not seek reelection, many have begun to wonder about the policy ramifications this development will have on the remainder of his term in office. Financial reform is one such area of policy reform that the senator is tackling with much speculation over his resolve concerning fiduciary duty reform.

The two bodies of thought that have emerged on both sides of the aisle favor either a strong or a weak fiduciary duty provision. The strong provision would clearly put broker-dealers under the current fiduciary duty requirements levied on registered independent advisors (RIAs) by requiring such brokers to register as RIAs. The weak provision would require brokers to be registered as RIAs, however, the Securities and Exchange Commission (SEC) would be given more authority to write the new fiduciary duty at some time in the future. This position is adamantly supported by the banking industry as it is far less definitive than the strong provision and is more likely to result in little change to the business model of broker-dealers than the alternative.

Dodd currently supports the so-called strong provision, this being in contravention of the House approved language in the Wall Street Reform and Consumer Protection Act of 2009. Many who advocate for the strong provision are hoping that by announcing his decision to relinquish his seat, Dodd will be freed from listening to the lobbyists of the banking industry and therefore will more steadfastly pursue the strong provision before his time in the Senate comes to a close.

Even if Dodd’s resolve remains unfazed by lobbyists’ attempts to change his position, it remains to be seen if other members of the Senate will act likewise.

Posted in Finance Fraud

Tags: Aisle, Banking Industry, Broker Dealers, Business Model, Christopher Dodd, Consumer Protection Act, Contravention, Fiduciary Duty, Independent Advisors, Lobbyists, Members Of The Senate, Provision, Ramifications, Reelection, Securities And Exchange, Securities And Exchange Commission, Senator Christopher Dodd, Senator Dodd, Speculation, Surprise Announcement

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SEC OBTAINS ASSET FREEZE OF JOSEPH S. BLIMLINE FOR HIS INVOLVEMENT IN THE PROVIDENT ROYALTIES $485 MILLION NATIONWIDE OFFERING FRAUD

December 7th, 2009

Before You Invest

On December 3, 2009, the Securities and Exchange Commission obtained a temporary restraining order and emergency asset freeze against Joseph S. Blimline relating to his involvement in a $485 million offering fraud and Ponzi scheme. The scheme was orchestrated by Joseph S. Blimline, Paul R. Melbye, Brendan W. Coughlin and Henry D.

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Posted in Finance Fraud

Tags: Broker Dealers, Complaint Charges, Coughlin, Disgorgement, Exchange Act, Frozen Assets, Gas Interests, Ill Gotten Gains, Injunctions, Investor Funds, Melbye, Oil And Gas, Provident, Royalties, Rule 10b, Sanction, Section 17, Securities Act Of 1933, Securities And Exchange Commission, Temporary Restraining Order

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InvestmentNews — LPL Sues Pac Life Over Purchase of Broker Dealers

November 30th, 2009

Before You Invest

Indemnification dispute with the insurer won’t affect their businesses, firm insists
By Bruce Kelly

At the same time that LPL Holdings Inc. and the three broker-dealers it bought from Pacific Life Insurance Co. were filing suit against the insurer, LPL was reaching out to its advisers to reassure them that the dispute wouldn’t affect their businesses.

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Posted in Finance Fraud

Tags: 100 Million, Arbitration, Bill Dwyer, Breach Of Contract, Broker Dealer, Broker Dealers, Bruce Kelly, Contractual Obligations, Indemnification, Insurer, Legal Matter, Life Brokers, Life Insurance Co, Lpl Financial, Pacific Life, Pacific Life Insurance, Pacific Life Insurance Co, Sales And Marketing, Securities License, State Supreme Court

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SEC Charges Investor Relations Firm and its Executives with Fraud, Registration Violations, and Acting as an Unregistered Broker-Dealer

November 19th, 2009

Before You Invest

Today the Securities and Exchange Commission (“Commission”) filed a civil action in the U.S. District Court for the Middle District of Florida, alleging that investor relations firm Big Apple Consulting USA, Inc. (“Big Apple”), its wholly-owned subsidiary MJMM Investments, LLC (“MJMM”), and four of its executives-CEO Marc Jablon, vice president Matthew Maguire, MJMM president Mark Kaley, and Keith Jablon, vice president of another Big Apple subsidiary-made public misrepresentations and material omissions about the financial state of CyberKey Solutions, Inc., (“CyberKey”) while the two entities sold hundreds of millions of CyberKey shares.

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Posted in Finance Fraud

Tags: Apple Executives, Apple Team, Broker Dealers, Business Relationship, Cyberkey Solutions Inc, Department Of Homeland Security, Investor Relations Firm, Jablon, Kaley, Matthew Maguire, Middle District Of Florida, Misrepresentations, President Mark, Registered Brokers, Registration Violations, Sec Charges, Securities And Exchange Commission, Securities Transactions, U S Department Of Homeland Security, Wholly Owned Subsidiary

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Medical Capital and Provident Charges make Broker-Dealers Think Twice

November 9th, 2009

Before You Invest

The charges of fraud brought against Medical Capital Holdings Inc. and Provident Royalties LLC by the Securities and Exchange Commission (SEC) has helped bring about a shift in the securities industry. Broker-dealers who were once willing to offer Private Placement deals to their clients with abandon are now more willing to scrutinize such deals than before.

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Posted in Finance Fraud

Tags: Abandon, Accounting, Broker Dealers, Business Model, Dividend Payments, Fraud, Investment Dollars, Investments, Measures, Medical Capital, Model Questions, Private Placement, Provident, Royalties, Scrutiny, Securities And Exchange, Securities And Exchange Commission, Securities Industry, Sense Of Urgency, Transparency

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CIT Group Seen as Lost Cause by Government, Even After Move to Generate Capital

November 4th, 2009

Before You Invest

Though taxpayer money has thus far kept embattled financial institution CIT Group, Inc. alive, the government is faced with the reality that it has made a bad investment. The company has finally filed for bankruptcy after unsuccessfully attempting to generate capital from the government, and generating capital from individual investors.

The reality that the government has lost over $2 billion in taxpayer TARP funds though its investment in CIT Group is regrettable.

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Posted in Finance Fraud

Tags: Bankruptcy Filing, Beneficiary, Broker Dealers, Cit Group, Cit Group Inc, Debacle, Face Value, Financial Institution, Individual Investors, Institutional Funds, Institutional Investors, Internotes, Investment Product, Marketing Strategy, Option Feature, Party Broker, Prospective Clients, Retail Investors, Survivor, Taxpayer Money

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SEC Chairman Shapiro on the Future of Investment

October 28th, 2009

Before You Invest

Mary Shapiro, Chairman of the U.S. Securities and Exchange Commission (SEC), gave a speech at the Securities Industry and Financial Markets Association (SIFMA) annual meeting yesterday signaling the agency’s priorities in the coming months and years. Key issues raised by Chairman Shapiro include revitalizing enforcement efforts, the need for forthrightness in consumer products, as well as filling gaps in regulation, among others.

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Posted in Finance Fraud

Tags: Broker Dealers, Declines, Disclosures, Economic Crisis, Enforcement Efforts, Filling Gaps, Financial Markets Association, Financial Sector, Forthrightness, Hedge Funds, Innovative Financial Products, Investment Advisors, Investor Confidence, Life Settlements, Mary Shapiro, Sec Chairman, Securities And Exchange Commission, Securities Industry And Financial Markets Association, Sifma, Target Date

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FINRA Supports Mandatory Arbitration Clause Removal

October 6th, 2009

Before You Invest

Richard Ketchum, Chairman and Chief Executive of FINRA, testified before the House Financial Services Committee today in support of allowing the SEC to ban mandatory arbitration clauses in securities contracts. It is common practice for broker dealers to stipulate a mandatory dispute resolution forum in the event of a broker/client dispute.

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