Articles Tagged with regulation

The Financial Industry Regulatory Authority (FINRA) recently fined Ameriprise Financial Services Inc. $850,000 for failing to detect the conversion of more than $370,000 from five customer brokerage accounts by one of its registered representatives. Ameriprise was accused of failing to adequately investigate red flags associated with nine third-party wire requests, including that the funds were being transmitted to a business bank account associated with one of Ameriprise’s representatives. This went on for two years before the misconduct was discovered. Ameriprise then paid restitution, plus interest and related fees and the representative in question was barred in June 2014.

FINRA found that from October 2011 until September 2013, a registered representative of the firm took more than $370,000 from five Ameriprise customers. The representative then submitted request forms to transfer funds from the customers’ brokerage accounts into the business bank account of the office in which he worked, allegedly for the intended purpose of making investments. He then took funds from that account in order to pay himself additional salary and commissions. This against securities rules and regulation, and, because Ameriprise allowed the transgressions to take place, the firm may be responsible for losses. If you experienced investment losses with Ameriprise Financial, please call our law firm in Chicago at 312-332-4200 today to speak with an attorney about your options. The call is free with no obligation. We sue firms such as Ameriprise in the FINRA arbitration process on a contingency fee basis, which means we don’t make money unless you recover yours.

According to a recent InvestmentNews article, Fidelity Investments suspended sales of MetLife Inc.’s retail variable annuities, as their sales fell by almost 40% in the second quarter of this year. MetLife’s retail variable annuity sales were down 39% year-over-year in the second quarter, primarily due to the sales suspension by Fidelity. In 2015 alone, MetLife was the number eight seller of variable annuities, with more than $7 billion in total sales. In February, Fidelity suspended the sales of MetLife products in the Growth and Income Annuity and the Accumulation Annuity. This was because the insurer announced in January that it was planning a separation of its U.S. retail unit, which provides variable annuities. This uncertainty over the potential sale or initial public offering of the business led to its decision to stop the sales. MetLife had $1.1 billion in variable annuity sales in the second quarter, compared to $1.9 billion in the same quarter in 2015. Insurers have seen industry-wide variable annuity sales slide over the past several years. Total first-quarter sales were at their lowest in 15 years, due mainly to market volatility. Sales are expected to continue to go down as new regulation comes into effect next year. Please call our securities law firm today to speak to an attorney. 312-332-4200.

According to a press release last week, a North Dakota farmer brought a claim against National Securities Corporation, alleging that brokers at the firm engaged in churning in his account, recommended unsuitable high risk securities and used boiler room tactics to convince him to invest in the unsuitable securities. Boiler room tactics can be classified by brokers selling stock (typically micro-cap stock) and using false or misleading statements to sell it, because of their overwhelming desire to sell the stock and claim large commissions for themselves. Often, the stocks that are touted trade on the Pink Sheets (or the system on which companies trade do not need to meet minimum requirements or file with the SEC), because this exchange requires very little in terms of disclosure and regulation.

According to the press release, brokers at National Securities Corp recommended the client purchase a small amount of stock in an agricultural security. Subsequently, the brokers then recommended the client invest most of the remaining balance of his account in a single high-risk security called the First Hand Technology Value. This concentrated approximately half of the client’s net worth into a single security. A broker must take into account the client’s age, net worth, investment objectives and portfolio sophistication before recommending or selling a security. If he does not, his brokerage firm may be responsible for investment losses because it is the firm’s responsibility to reasonably supervise their brokers.

Up until that point, the client’s investment experience had been limited to self-directed trades in a relatively small online account, and conservative trades in his IRA. According to the allegations in a claim filed with the Financial Industry Regulatory Authority (FINRA), the brokers failed to discuss with the customer his investment experience, and also failed to discuss the risky and speculative nature of the securities they were purchasing for them. The brokers continued to aggressively buy and sell stocks in the customer’s account, sometimes using margin debt. The client was not aware what margin was, nor was he aware that he was accumulating significant interest obligations. When the client attempted to close his account in 2014, the brokers met with the client in person, convincing him to leave the account in their hands and convincing him to give them more money. The customer then gave them the rest of his savings, which the brokers subsequently put half into a single illiquid, high-fee investment. These tactics resulted in the client losing more than half a million dollars, not including his losses sustained in a private real estate investment trust (REIT).

The Massachusetts Securities Regulator, William Galvin, recently filed a lawsuit against the SEC to overturn a recently adopted rule. Galvin claims the adopted rule curtails state oversight of stock offerings by small and emerging companies. The new regulation, Regulation A+, was adopted in April and seeks to ease the registration requirements for start-up companies that wish to raise up to $50 million. Offerings up to $20 million would be filed with the state and SEC. Between $20 and $50 million would require SEC registration only. Galvin claimed the rule was vague in its definition of the type of investor who qualifies to purchase the small offerings, such as local businesses could target retail investors because it did not place net worth or salary restrictions. The state of Montana also brought a suit against the rule.

French Hill, a Republican congressman from Arkansas, proposed to shift oversight of investment advisors to the Financial Industry Regulatory Authority (FINRA) from the Securities and Exchange Commission (SEC). He is considering legislation that would give FINRA the authority to examine investment advisors. His stated motivation for doing so is to increase the percentage of advisor examined annually. Officials of the Investment Adviser Association (IAA) spoke out against his proposed legislation after being debated in Congress for years. Last week, a House Financial Services Committee bill passed that would provide a safe space to allow advisers and broker/dealers to provide data on exchange-traded funds (ETFs) to their clients without reports to be considered “offers.” The IAA still believes that the best option is to retain the SEC’s primacy in investment advisor regulation and oversight.

The IAA is in strong opposition to the SRO model. They believe that the model would impose an unnecessary layer of regulation and bureaucracy on advisors beyond what is necessary to increase examinations. They believe there would be questions regarding transparency, accountability, track record and appropriate oversight by the SEC and Congress. A spokesperson for the IAA was quoted as saying: “The IAA will continue its effort to ensure that the SEC has the resources it needs to do the job that it is legally mandated to do.”

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