Articles Tagged with FINRA Arbitration

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from dealing with broker-advisors who have violated securities laws. When brokerage houses or investment advisers make big “block” stock trades, there are numerous rules they must follow to ensure that other investors don’t get burned. They are not allowed to “front run,” an illegal brokerage practice of a stockbroker placing an order for their own account ahead of the client’s, knowing when the client’s order is placed it will move the market and create a profit for the broker.

Disruptive Technology Solutions LLC, a software services company, and affiliated funds, have filed a demand for arbitration against Morgan Stanley with FINRA, the federal securities industry regulator, according to The Wall Street Journal.

“Disruptive alleges that Morgan Stanley and a senior executive there leaked information ahead of the fund’s sale of more than $300 million of Palantir in February 2021, resulting in tens of millions of dollars in damages,” the Journal reports. Disruptive is seeking compensatory and punitive damages. Palantir is a software firm that provides a wide range of platforms from artificial intelligence to supply chain products.

Chicago-based Stoltmann Law Offices represents investors who’ve suffered losses as a result of their broker excessively trading and churning their accounts. Brokers have been known to take advantage of clients who have margin accounts and give them permission to trade at will. Although investors place a great deal of trust in their broker-advisors, sometimes this confidence is abused.

FINRA, the federal securities regulator, found in a recent report that brokers don’t always pay attention to customers’ risk tolerance and violate FINRA rules on risk monitoring. To say this is no surprise to the attorneys at Stoltmann Law Offices, who have fifty years of combined experience representing investors in claims against brokerage firms, is an understatement. According to FINRA, “Firms are required to monitor the risk of the positions held in these accounts during a specified range of possible market movements according to a comprehensive written risk methodology,” which has a stack of rules governing the conduct of brokers and the firms that supervise them.

FINRA’s guidelines on informing clients on portfolio risk include the following:

Chicago-based Stoltmann Law Offices offers representation on a contingency fee basis to investors nationwide that have suffered investment losses as a result of unscrupulous financial advisors who’ve misrepresented the risks of investments or traded their accounts without express permission.

The U.S. Securities and Exchange Commission (SEC) has obtained a partial judgement against Michael F. Shillin, a former Raymond James financial advisor, “accused of defrauding at least 100 investment advisory clients, many of whom were elderly, by fabricating documents and making misrepresentations about their investments,” according to thediwire.com.

Shillin, according to the SEC, “allegedly told certain clients that they had subscribed for Initial Public Offering or pre-IPO shares, or that he had bought stocks on their behalf, in certain `coveted companies.’ He also is accused of misrepresenting the purchase of life insurance policies with long-term care benefits, with several clients rolling over their existing policies into new ones, which were either non-existent or had far fewer benefits than he claimed.”

Chicago-based Stoltmann Law Offices is investigating financial advisors who switch clients into more expensive alternative investments that trigger unnecessary fees and investment losses.

FINRA, the federal securities industry regulator, has settled charges with McNally Financial Services Corporation that the broker-dealer failed “to develop appropriate oversight procedures for sales of non-traditional exchange traded products (ETFs).” The regulator found that the firm “failed to supervise a representative offering complex options trading to customers and determined that a firm representative recommended trades with, in some cases, a maximum potential loss nine times higher than maximum potential gain, and in other cases, with an assured loss.”

Brokers often recommend and trade “non-traditional” vehicles such as options contracts and Exchange-Traded Products (ETPs) with the promise of offering higher returns. These products, however, carry higher risk and generate exorbitant fees and commissions for brokers. These investments, Finra notes, “typically are not suitable for retail investors who plan to hold them for more than one trading session.”

Chicago-based Stoltmann Law Offices is investigating claims by investors in connection with financial advisors who switch clients into more expensive investments that trigger unnecessary fees. Overtrading in a brokerage account or “churning” has long been an industry abuse. But some brokers take churning to new limits.

FINRA, the US securities industry regulator, has suspended a former Edward Jones broker for six months and fined him $7,500 for allegedly making more than 800 transactions in four of his clients’ accounts without their authorization or consent, according to thinkadvisor.com.

From December 2017 to November 2018, Albert L. DeGaetano “executed 470 securities transactions in the accounts of a fundraising organization for a charitable hospital without its authorization or consent,” according to the FINRA letter. The 823 securities transactions in all, which included 389 purchases of exchange-traded fund (ETF) bonds, had a total principal value of about $7.2 million and generated approximately $113,000 in total trading costs, according to FINRA.

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from dealing with broker-advisors who’ve hidden their outside financial activities. Sometimes, brokers have “side deals” while working at an advisory firm, which they may pitch to existing clients. In a heavily regulated industry, they have to tell their employers and these so-called “outside business activities”, including outside brokerage accounts. When they fail to disclose their other businesses, they can be fired.

FINRA, the federal securities regulator, fined and suspended an ex-Wells Fargo broker “who was terminated by the wirehouse for failing to close three outside brokerage accounts despite being told to do so numerous times by the firm,” according to ThinkAdvisor.com. Without admitting or denying FINRA’s findings, Jacob Popek signed a FINRA Letter of Acceptance, Waiver and Consent on Aug. 31 “in which he consented to the imposition of a $2,500 fine and a three-month suspension from associating with any FINRA member in all capacities.” Wells Fargo declined to comment.

Between November 2018 and April 2020, FINRA stated, “while associated with Wells Fargo, Popek maintained outside brokerage accounts without the firm’s written consent. In October 2018, Popek informed the firm that he maintained three outside brokerage accounts at two other member firms.” Wells Fargo said it “directed Popek to close those accounts. But despite receiving that instruction and multiple subsequent instructions from the firm to close the accounts in 2019, he maintained each of these accounts until July 2019, December 2019, and April 2020, respectively,” according to FINRA.

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from financial advisors who’ve swindled investors through unauthorized transactions. Can financial advisers trade your portfolio or buy investments without your permission? Only if you give them “discretionary” authority and definitely not if they’ve failed to obtain your written okay.

Without a doubt, brokers can’t do anything with your assets if they forge your signatures to make a transaction. Joffre Salazar, a former broker with LPL Financial, was terminated by the brokerage firm after he “forged two customers’ signatures and initials on documents connected to the purchase of fixed annuities, which Salazar then also submitted without the customers’ authorization,” according to FinancialAdvisorIQ.com.

Salazar, who first registered with Finra, the federal securities regulator, in 1991, registered with LPL in 2016, according to Finra. In April 2019, LPL filed a termination notice for Salazar, stating that he resigned voluntarily, but two months later amended the form to disclose that it started a review of Salazar’s “involvement in processing [an] annuity application without customer authorization,” Finra stated.

Chicago-based Stoltmann Law Offices has represented Morgan Stanley clients who’ve suffered losses as a result of fraudulent or negligent misconduct by Morgan Stanley and the firm’s financial advisors.

Here is a simple question too many investors do not know the answer to: Can brokers decide on their own when to buy or sell an investment in your account? Answer: Not unless you give them written permission to do so. If brokers ignore your instructions, you can file an arbitration claim and be awarded damages.  Joan A. Rudnick and an entity owned by her, Oak Trail Associates, filed a claim against her broker, Morgan Stanley, in October 2020. The claim charged the broker with “unauthorized trading, breach of contract and duty of loyalty, unjust enrichment and conversion,” according to Investment News.

Rudnick’s claim was filed when her broker sold Apple stock in her portfolio against her wishes. A retiree in her late 70s, Rudnick “had held the Apple stock for a long time and did not intend to sell it,” her attorney told Investment News. “She had put a no-trade restriction on the stock, but it was sold around March 2019. Morgan Stanley acknowledged the shares were sold without Rudnick’s authorization.”  Rudnick was awarded “$482,000 in compensatory damages, $83,372 in federal and state taxes, $45,000 in attorneys’ fees, $25,000 in brokerage fees, $5,000 in expert fees, $1,863 in costs and $375 for a non-refundable filing fee.” A Morgan Stanley spokesperson declined to comment to Investment News. “The arbitration award states the firm denied the allegations in the FINRA statement of claim and asked that it be dismissed in its entirety.” FINRA is the federal securities regulator that handles arbitration claims for investors.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered investment losses from “rogue” brokers. Without question, securities firms are legally obligated to protect your money from brokers who run afoul of the law. Yet these “rogue” brokers often get away with theft right under the noses of their employers.

The case of Hector May, a former broker with Securities America, is a case in point. May, who was employed by Securities America from 1994 to 2018, pled guilty to stealing some $8 million from his clients in 2018, according to Investment News. May was sentenced to 13 years in prison and ordered to pay $8.4 million in restitution in 2019. Was May’s firm responsible for protecting his clients? In charging Securities America for “allegedly failing to safeguard clients” from May, the U.S. Securities and Exchange Commission (SEC) fined Securities America $1.75 million. Securities America Advisors neither admitted to nor denied the SEC’s findings.

The SEC reported that Securities America had knowledge that May wasn’t doing right by his clients. “The SEC alleged that one Securities America surveillance system generated multiple alerts for potentially suspicious withdrawals from client accounts, but its analysts failed to carry out the prescribed processes for investigating those alerts,” Investment News reported. “The commission also alleged that the firm permitted disbursements without the required signatures, and another group failed to contact clients to verify that they had initiated disbursement requests.”

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from brokers and advisers in FINRA, AAA, and JAMS arbitrations for over fifteen years. One of the biggest problems with resolving investor or consumer complaints is that people are forced to go through a mandatory arbitration process. While this system avoids having to go to court – and can be less expensive – it’s often patently unfair because of lack of diversity among arbitrators.

Another overwhelming issue is that mandatory arbitration, which is in nearly every brokerage and consumer dispute resolution agreement, takes away your right to sue a firm that’s wronged you. That often limits your ability to be made whole and collect damages. And who sits on arbitration panels may restrict your legal options even more.

A recent study by the American Association for Justice found three major, disturbing flaws in the private arbitration system:

CNBC
FOX Business
The Wall Street Journal
Bloomberg
CBS
FOX News Channel
USA Today
abc NEWS
DATELINE
npr
Contact Information