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Posts Tagged ‘Financial Industry Regulatory Authority’

FINRA Seeks Expansion of Brokercheck Tool

February 23rd, 2010

Before You Invest

The Financial Industry Regulatory Authority (FINRA) is currently seeking to expand its Brokercheck tool. Brokercheck gives individuals access to professional information regarding registered brokers and firms. The hope is that investors will use this tool to better get to know the people and companies with whom they are placing their money.

FINRA is seeking to expand this information to include customer complaints reported publicly and to extend the public disclosure period for the full record of a broker who leaves the industry from two to ten years. Also, in a move to go beyond the financial world, FINRA seeks to add to Brokercheck criminal convictions and civil and arbitration judgments involving former brokers.

Richard Ketchum, Chairman and CEO of FINRA, believes that the additional information will help investors, “who are considering whether to conduct, or continue to conduct, business with a particular securities firm or broker. Just as important, they will provide valuable information about persons who have left the securities industry, often not of their own accord, but who can still cause great harm to the investing public.” The new information would include complaint made back from 1999 when electronic filing of broker information began.

Posted in Finance Fraud

Tags: Arbitration, Ceo, Criminal Convictions, Customer Complaints, Electronic Filing, Financial Industry Regulatory Authority, Finra, Investors, Judgments, Ketchum, Money, Own Accord, Public Disclosure, Registered Brokers, Securities Firm, Securities Industry, Tool

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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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FINRA Fines Two Financial Firms for Inadequate Anti-Money Laundering Programs

February 3rd, 2010

Before You Invest

The Financial Industry Regulatory Authority (FINRA) has fined two financial firms for insufficiencies in their anti-money laundering (AML) programs. Penson Financial Services of Dallas, Texas and Pinnacle Capital Markets of Raleigh, North Carolina were fined $450,000 and $300,000, respectively. These two fines follow a similar action in October 2009 involving deficiencies in the AML program at Scottrade.

Penson Financial Services was fined for failing to operate a functional AML compliance program. The specific failure involved insufficient personal resources allotted to review AML exception reports. In addition to this, FINRA found that penny stock deposits and liquidations were insufficiently reviewed, thus allowing the possibility for fraud and money laundering. Also, written AML procedures were inadequate, and the firm failed to maintain accurate records regarding unsecured deficits in the accounts of its correspondent firms, among other things. Despite enhancements to its AML program in 2007, deficiencies remained endemic to the Penson AML program.

Pinnacle Capital Markets, whose principal business relates to providing online access of U.S. securities markets to foreign customers, including many foreign financial institutions, was fined for deficiencies found regarding detection and reporting of suspicious activity as well as failure to guarantee the identity of account holders. The firm used a manual system of daily reviewing its trade blotter and in doing so failed to detect suspicious trading activity. One such failure involved a pump and dump scheme targeted in a Securities and Exchange Commission (SEC) enforcement action. In a specific failure based on their precise business model, Pinnacle failed to verify the identity of sub-account holders whose accounts were created under the main accounts of foreign financial institutions.

In typical fashion, the firms neither affirmed nor denied the charges against them. To read the official FINRA press release, click here.

Posted in Finance Fraud

Tags: Accurate Records, Aml Program, Anti Money Laundering, Compliance Program, Correspondent Firms, Exception Reports, Financial Industry Regulatory Authority, Financial Institutions, Finra, Insufficiencies, Liquidations, Penny Stock, Penson Financial Services, Personal Resources, Principal Business, Raleigh North Carolina, Sec Enforcement, Securities And Exchange Commission, Securities Markets, Typical Fashion

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FINRA Announces Grant to Establish Legal Clinics for Disadvantaged Investors

January 29th, 2010

Before You Invest

The Financial Industry Regulatory Authority (FINRA) has announced the award of $1 million in grants split among four law schools. Each $250,000 award will go towards launching legal clinics to provide aid to disadvantaged investors involved in securities disputes. Currently, many investors who file small claims find law firms unwilling or unable to represent them. However, even those that do find counsel sometimes hit with prohibitive hourly costs. The four new law clinics will work with such investors to fill this gap in legal services. Pepperdine University School of Law, a Los Angeles area school, is one such recipient of FINRA funds.

The four schools were chosen in part because of their willingness to not only launch this program, but to maintain the clinics past the three year grant period. Further, they have demonstrated a commitment to investor education and outreach in their respective communities. This is the third iteration of FINRA’s clinic grant program, the first recipient being Northwestern University School of Law in 2004 and the second recipient being an established clinic at Pace Law School in 2006.

To view the official press release, please click here.

Posted in Finance Fraud

Tags: 1 Million, Financial Industry Regulatory Authority, Finra, Gap, Grant Program, Investor Education, Law Clinics, Law Firms, Law Schools, Legal Clinics, Northwestern University School, Northwestern University School Of Law, Outreach, Pace Law School, Pepperdine University School, Pepperdine University School Of Law, Recipient, Small Claims, Third Iteration, Willingness

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Massachusetts Files Charges Against Securities America Regarding Medical Captial Holdings Inc.

January 26th, 2010

Before You Invest

Today, Massachusetts Secretary William Galvin brought the first state enforcement case against Ameriprise Financial’s (AMP) Securities America unit. State regulators are charging the broker/dealer with improper sales of risky promissory notes in (506) private placement deals. The claim alleges that Securities America knowingly marketed and sold notes issued by Medical Capital Holdings Inc, a now defunct Tustin, California based medical receivables company, as safe investment to everyday retail investors.

The reality is, private placement deals are meant only for institutional and well adept investors, and such products represent a high degree of risk. Galvin estimates that over 60 Massachusetts residents bought $7.2 million worth of the offering, this representing only a fraction of the total..

The notes were sold over a period of time in which Securities America actively marketed the products, even after having received a warning from a top company official of potential issues at Medical Capital. The Securities and Exchange Commission (SEC) filed civil fraud charges against Medical Capital 2009 and is currently attempting to preserve company assets in an attempt to preserve at least some of the investors’ capital.

Regardless, many have turned to Financial Industry Regulatory Authority (FINRA) arbitration as a means to recoup their investment loss. The self regulatory agency (SRO) has increased enforcement on private placement deals in line with current SEC filings.

To view the Massachusetts complaint in addition to SEC filings, click here.

Posted in Finance Fraud

Tags: Ameriprise, Ameriprise Financial, Civil Fraud, Company Assets, Degree Of Risk, Financial Industry Regulatory Authority, Fraud Charges, Investment Loss, Investors Capital, Massachusetts Residents, Massachusetts Secretary, Medical Capital, Medical Receivables, Private Placement, Retail Investors, Secretary William, Securities And Exchange Commission, State Regulators, Tustin California, William Galvin

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Securities America CEO Steps Down Amid Growing Arbitration Claims

January 25th, 2010

Before You Invest

Last week Securities America CEO Steve McWhorter announced his decision to retire after 22 years of service. His stated reason for leaving is that he wishes to spend time with his family, and he has stressed that there is no underlying reason for his departure. Despite this, some are questioning the timing of his announcement as a spate of client arbitration claims hit the Financial Industry Regulatory Authority (FINRA).

This string of complaints stem from multiple Securities America products ranging from the now defunct Medical Capital Holdings Inc., to Tenants In Common (TIC) products that have failed. Medical Capital is perhaps the most flagrant managerial failure for Securities America as a court appointed receiver has demonstrated overt fraud in court filings on the part of the medical receivables company. Clients of Securities America have lost millions as a result of this and other product failures.

Despite these recent failures, McWhorter is praised for the growth of Securities America during his time there. He is expected to remain in his current position until a willing replacement is found, and given the great deal of disgruntled clients and scrutinizing regulators, he may be waiting quite some time.

Posted in Finance Fraud

Tags: 22 Years, Arbitration, Ceo, Company Clients, Court Filings, Current Position, Failure, Financial Industry Regulatory Authority, Fraud, Lost, Mcwhorter, Medical Capital, Medical Receivables, Product Failures, Regulators, Securities America, Spate

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FINRA Arbitration Cases Boom in 2009

January 22nd, 2010

Before You Invest

The Financial Industry Regulatory Authority (FINRA) has reported a significant increase in the amount of cases filed by investors over the past year as compared with years past. For the 2009 calendar year, 7,137 new arbitration cases were filed as opposed to 4,982 filed in 2008; this represents an increase of 43%. Investor claims are not only increasing, but turnaround time for cases has increased as well. The average time for a case that continues through to arbitration was 14 months in 2009 as opposed to 15.7 months in 2008, a 12% decrease in time. Simply put, more cases are going through arbitration and at a faster rate than in the past.

For a complete look at the available statistics, click here.

Posted in Finance Fraud

Tags: 7 Months, Arbitration Cases, Boom, Calendar Year, Financial Industry Regulatory Authority, Finra, Investor Claims, Investors, Statistics, Turnaround Time

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Elder Abuse Cited in Recent Arbitration Award

January 9th, 2010

Before You Invest

A recently decided Financial Industry Regulatory Authority (FINRA) arbitration case has caused commotion in the financial industry over its invocation of elder abuse in its arbitration decision. Though often used in claimant complaints, elder abuse is rarely cited by arbitrators when awarding damages. The complaint, filed against StockCross of Beverly Hills, California by a 95-year old client, charged the firm with breach of fiduciary duty and elder abuse, among others.

By sustaining elder abuse in a decision, arbitrators can award treble damages, allowing the sum of the damage amount to be tripled and added to the original damage amount. In this case, the arbitrators elected to invoke that privilege, citing the Financial Elderly Abuse Act: California Welfare & Institutions Code15600, et seq. The award therefore went from around $300, 000 to more than $1.2 million.

Unsurprisingly, StockCross has already filed a motion to vacate in an effort to avoid paying the award amount. Such motions, however, are often ineffective in reversing the binding arbitration decision.

Posted in Finance Fraud

Tags: Abuse Act, Arbitration Award, Arbitration Case, Arbitration Decision, Arbitrators, Beverly Hills California, Binding Arbitration, Breach Of Fiduciary Duty, California Welfare, Claimant, Commotion, Elder Abuse, Elderly Abuse, Financial Industry Regulatory Authority, Invocation, Motions, Privilege, Seq, Stockcross, Treble Damages

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FINRA Issues Regulatory Notice Aimed at Principal Protected Notes

January 7th, 2010

Before You Invest

FINRA has issued a regulatory notice this month that stresses the need for brokerage firms to disclose the risk to investors in so-called Principal-Protected Notes. The notice, which may be viewed here, cautions firms from overstating the level of protection inherent in this structured product.

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Posted in Finance Fraud

Tags: Arbitration Claims, Bankruptcy Case, Brokerage Firms, Capital Preservation, Case In Point, Credit Worthiness, Financial Industry Regulatory Authority, Guarantor, Investor, Investors, Lehman Brothers, Ppns, Principal Protected Notes, Principal Protection, Protection Feature, Regulatory Notice, Risk, Structured Product, Surprise, Ubs

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FINRA Fines Pacific Cornerstone Capital, CEO $750,000

January 6th, 2010

Before You Invest

The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Pacific Cornerstone Capital, Inc. of Irvine, CA, and its former chief executive officer, Terry Roussel, a total of $750,000 for failing to include full and complete information in private placement offering documents and marketing material.

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