The Resolution Law Group: SEC Wants Comments About FINRA’s Proposed Rules About Broker-Dealer Supervision

The Securities and Exchange Commission wants comments on a proposed amendment to the Financial Industry Regulatory Authority’s broker-deal supervision rules. The latter wants to change the rules by consolidating some of them, including NASD Rule 3010 and NASD Rule 3012 into its proposed Rules 3110 and 3120 that have to do with supervisory controls and the supervision of supervisory jurisdictions’ office and branch offices. The proposed rule change would eliminate NYSE Rule 342, which is related to supervision, approval, and controls, Rule 401 about business conduct, and Rule 354 regarding control persons, Rule 351e about reporting requirements. The consolidation is taking place because the SEC says some of the rules are duplicative.

FINRA also wants to eliminate proposed Rule 3110.03, which is a provision about the supervision and control of registered principals at one-person OSJs by a designated senior principal on the site. The SRO also is proposing to amend rule 3110.05 so that an Investment Banking and Securities Business member doesn’t have to perform detailed reviews of transaction if the member is using risk-based review system that is designed in a way so it can focus on areas that have the greatest risks of violation.

Meantime, proposed Rule 3110(b)(6)(D) will be changed so that it is clear that the rule doesn’t establish a strict liability to identify and get rid of all conflicts as they relate to an associated person that is supervised by supervisory personnel. There will have to be procedures to make sure that conflicts of interest don’t compromise the supervisory system.

As for proposed rule 3110(c)(3)(A), this will be modified so it is clear that it doesn’t establish a strict liability duty mandating the ID’ing and getting rid of all conflicts of interest as they relate to the inspections taking place at a location. Members will have to implement procedures designed so that they don’t let the effectiveness of inspections become compromised by such conflicts.

The Resolution law Group represents investors that have sustained financial losses because of broker fraud. Contact our securities law firm today.

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The Resolution Law Group: Goldman Sachs Appeals Vacating of Securities Award, Non-Customers of Brokerage Firm Can’t Compel Arbitration, & Three Governors Named To FINRA Board

Goldman Sachs Wants Third Circuit To Look at Vacated Arbitration Award
Goldman Sachs (GS)wants the U.S. Court of Appeals for the Third Circuit to look at a decision by a lower court to vacate a FINRA securities award issued by a panel member that included arbitrator Demetrio Timban, who was indicted on criminal matters and suspended. The securities case is Goldman Sachs & Co. v. Athena Venture Partners LP and involves an investor accusing the firm of making misrepresentations. The U.S. District Court for the Eastern District of Pennsylvania remanded the award, which favored the financial firm.

The district court said FINRA didn’t give the parties three arbitrators who were qualified and said the respondent’s rights were prejudiced. Judge J. Curtis Joyner said that therefore, a “final and definite award” was not issued. Following the scandal involving Timban, FINRA said it now would perform yearly background checks of arbitrators and other reviews before they are given a case.

District Court Says Buyers Who Are Not Broker-Dealer’s “Customers” Cannot Compel Arbitration
A district court has preliminarily enjoined an arbitration proceeding involving real estate investments. In Orchard Sec. LLC v. Pavel, the U.S. District Court for the District of Utah said that buyers were not a managing brokerage firm’s “customers” and did not have the right to compel arbitration under the SRO’s rules. The court also said that as the plaintiff firm Orchard Securities clearly demonstrated that its chances of success on its claim’s merits.

Margaret and Michael Pavel had filed an arbitration proceeding with FINRA contending that they had securities claims involving their purchase of tenant-in-common interests, including a New York offering that Orchard Securities LLC managed as a brokerage firm. Orchard Securities contended that it could not be made to arbitrate because there was no arbitration agreement or facts showing that the Pavels were its customers and therefore could compel arbitration. The NY offering had been recommended by a registered rep. with Direct Capital, which was a third-party broker-dealer enlisted by Orchard Securities.

Three Governors Are Elected to SRO’s Board, Four Are Reappointed
FINRA says that its members have elected two industry governors: Robert Keenan, who is St. Bernard Financial Services CEO, and James D. Weddle, who is Edward Jones’s managing partner. Keenan was elected small firm governor, while Weddle will be his large firm counterpart. Shelly Lazarus, who is an ex- Ogilvy & Mather chairman and CEO, was named a public governor.

Four other governors received reappointments to the board, which oversees FINRA. The board is comprised of 22 people—10 industry governors and 11 public ones. FINRA’s CEO also has a seat.

If you feel you are the victim of FINRA Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

The Resolution Law Group: FINRA Reports Losses After Squandering Profit From NYSE Payment

Last month, the Financial Industry Regulatory Authority put out its yearly report for 2012. According to the results, the self-regulatory organization is hurting. Its operating losses are huge—nearing $90 million for the second year straight. Meantime, its staff has grown 13%, with benefits and compensation rising 41% in the last five years to hit $628.9 million last year. That’s a significant jump from 2007 when the SRO’s compensation and benefits was $446.1 million. Retirement and pension expenses have risen 89% in the last five years.

While observers say that FINRA’s operating losses are not an immediate danger, no one can say for sure. Some are even asking how could a regulator facing potential financial trouble do its job and protect investors? Unlike its last five yearly reports, FINRA’s 2012 report pointedly says that the will keep observing the changing economy and assessing any effect on the organization. If there were to be a huge market collapse, however, FINRA’s equity would take a beating.

The private SRO is the National Association of Securities Dealer’s successor. NASD’s merger with the New York Stock Exchange (NYSE) Regulatory Division is one reason for the increase in FINRA’s compensation. After its merger with the NYSE Regulatory Division, NASD soon changed its name to the Financial Industry Regulatory Authority (FINRA).

““In order to divest itself of its non-market making regulatory responsibilities the NYSE exchange actually paid the NASD over $150 million, approximately $35,000 per NASD member firm, “ said FINRA arbitration attorney William Shepherd.

Like others in the securities’ industry, FINRA’s portfolio also was hit by the financial crisis.

Meantime, as broker-dealers continue to close shop, with middle and small sized firms upping costs to keep up with compliance and regulation costs, FINRA’s brokerage firm membership has gone down.

“FINRA remains an association of securities dealers, not a government regulator as many may believe.,” said Securities Attorney Shepherd. “FINRA still derives some of ts income from its members through dues, fees and fines. As a self-regulatory organization (SRO) FINRA must answer to the Securities Exchange Commission (SEC) regarding rule changes, etc. Some therefore call FINRA and other self-regulatory financial SRO’s ‘quasi-governmental’ regulators. “

To “balance the books,” Stockbroker fraud lawyer Shepherd offers some simple suggestions:
• First, stop paying your head regulators 7 figure incomes – yes, over a million per year. Real regulators on government pay make a fraction of that!

• Next, fine your members ‘til it hurts. Strike some real fear into would-be wrongdoers to clean up their acts.

• Moreover, strike fear into bosses who either ignore what’s happening or do not want to kill any gold laying geese. The fear of getting caught is not severe if the penalty does not fit the crime.

“Beyond some flashy exceptions, too many fines remain mere wrist slaps. Too many times smaller firms and ‘rogue’ brokers are crushed, while large firms and those charged with supervision and/or ‘control person liability’ even go unscathed,” said Shepherd. “When firms and supervisors have no real worries, bad actors simply become expendable – but only when their costs outweigh their contributions to firm revenue.”

If you feel you are the victim of FINRA Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

The Resolution Law Group: Financial Firms in the Headlines: UBS Charges Financial Planning Fees, MF Global Customers Seek to Cap Ex-Leaders’ Legal Defense Expenses, Ex-Thompson REIT CFO is Suspended

UBS Wealth Management Customers Now Paying a Fee for Financial Plans
UBS (UBS) Wealth Management Americas is now charging a fee for the financial plans that advisers are customizing for the firm’s clients. According to the head of the wealth management advisor group head Jason Chandler, this new policy wasn’t implemented to up firm revenues, although it has. Rather, it was set up to increase the level of commitment clients have to their plan, which he say is what happens when they have to pay money for one.

To date this year, the company has made $3 million in financial plan fees, up from $1.4 million from last year. The average fee amount is $4,100. Advisers who design the financial plans are getting 50% of the fee that they charge, while 15% of the fees earned from the plans end up in expense accounts for them.

MF Global Customers Seek to Cap Legal Defense Bills of Brokerage Firm’s Former Executives
MF Global Inc. customers want to limit how much the former top executives of the failed brokerage firm pay for their legal defense. In a court filing, attorneys for the customers expressed concern at how quickly the legal costs of Chief Executive Jon Corzine and other former executives are growing.

The MF Global clients are suing about two dozen former managers for their alleged misconduct that they believe caused the broker-dealer’s collapse. Of the $200 million in insurance coverage that the firm has to cover legal judgments, $30 million has gone toward the ex-executives defense and they are asking for another $10 million. The brokerage customers want a $40 million cap placed on the defense costs. They are worried that the more the ex-MF Global executives spend toward defense the less money there will be to go toward their own $300 million shortfall they are facing and they won’t be made whole for the financial losses they sustained.

Ex-Thompson REIT CFO Gets Five-Month Securities Industry Suspension
The Financial Industry Regulatory Authority is suspending Wendy J. Worcester from the securities industry for five months. Worcester was previously chief financial officer of real estate investor Tony Thompson‘s nontraded real estate investment trust, as well as co-chief compliance officer of TNP Securities LLC, which is the brokerage firm controlled by Thompson. The SRO says that Worcester did not perform independent and sufficient due diligence into Thompson’s real estate dealings, including three Thompson National Properties LLC-sponsored private placement offerings. This caused her to allegedly compromise TNP Securities’ independence.

According to FINRA, When Thompson National Properties was in financial trouble in 2009, suffering nearly $25.8 million in losses and a negative net equity of $13.6 million while launching REIT The TNP Strategic Retail Trust Inc., two Thompson private placement note programs would go on to pay old investors with either new investor funds or money from some other part of the business. Worcester is settling the REIT securities case without denying or admitting to the allegations.

Please do not hesitate to email or call the Securities Fraud at The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

The Resolution Law Group: FINRA Fines Wells Fargo $1.25 Million for Unsuitable Investments

On June 4, 2013, the Financial Industry Regulatory Authority (FINRA) fined Wells Fargo Advisors, LLC (successor for Wells Fargo Investments, LLC) $1.25 million and ordered them to reimburse $2 million in losses to 239 customers for losses incurred from unsuitable sales of floating-rate bank loan funds. Here is a link to the FINRA news release.

Floating-rate bank loan funds are investments in a portfolio of secured senior loans to companies with below investment-grade credit ratings and are illiquid and subject to various risks. FINRA found that Wells Fargo suggested investment in these products to customers whose risk tolerance, investment objectives and financial conditions were inconsistent the risks associated therewith.

If you have losses on investments that you believe were unsuitable for you or which you purchased based on the misrepresentations of the broker who made the sale, you may be able to recover all or a part of those losses through FINRA arbitration. Call The Resolution Law Group for a no charge consultation to discuss your legal rights. www.TheResolutionLawGroup.com

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

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The Resolution Law Group: Former Broker Claims He is the Reason FINRA’s Regional Director Resigned, While Ex-JP Morgan Broker Files Arbitration Claim Against His Former Employer

According to former broker David Evansen, he is the reason that Mitchel C. Atkins, the Financial Industry Regulatory Authority Inc.’s District 7 region director, resigned. His claim differs from the SRO’s statement about how Atkins decided to step down “pursue other interests.” Aktins, as FINRA regional director, was in charge of Florida, Atlanta, New Orleans and Dallas, and he worked with the agency for 20 years.

Evansen said that he wrote to FINRA chief executive Richard Ketchum and regulatory operations EVP Susan Axelrod to let them know that Atkins was indicted on both a misdemeanor and felony charge in Louisiana two decades ago. He said that he couldn’t confirm for sure that his letter is why Atkins resigned but he is convinced that it is.

Per Evansen, Atkins purportedly used bingo game earnings for non-charitable purposes, which is illegal in that state. While the felony charge was dropped, Evansen said that Atkins pleaded guilty to the misdemeanor charge. After Atkins complied with his sentence term, which included conditional probation, community service, and other specifics, his record was expunged.

Evansen is no longer a member of the industry. A FINRA hearing barred him last year after he purportedly answer questions regarding a number of customer complaints made against him during his time at Newbridge Securities Corp. Evansen is appealing the ban, claiming he was not properly told about the inquiry. He also maintains that he did answer FINRA’s questions.

Another broker who recently has been making waves is Bryant Tchan, who was formerly with JP Morgan (JPM) and his now with U.S. Bancorp Investments Inc. Tchan filed an arbitration claim against J.P. Morgan Securities LLC, the bank’s securities unit, claiming that commissions to brokers for outside fund trades were withheld in order to push proprietary fund sales.

Tchan contends that there was an internal review system that identified nonproprietary fund trades and brokers had 30 days to respond to inquiries or risk losing compensation. He says that the system withheld pay despite the fact that outside mutual fund trades took place and clients were billed sales fees. Meantime, Tchan claims, he was discouraged from using other vendors.

He says he was forced to step down from his job and exit a “hostile work environment.’ Tchan contends that after complaining about the supervisory system, a compliance officer and his supervisor implied he would be let go because they didn’t believe him when he said that specific switches he made, which included changing certain clients’ stock mutual funds into bond funds that were nonproprietary, were executed to help portfolios better meet client goals.

If you suspect that you are the victim of Mortgage Fraud, do not hesitate to email or call please contact The Resolution Law Group at (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud

Securities Roundup: Venecredit Fined $25K for Working with Foreign Finders, Ex-Merrill Lynch/LPL Financial Rep. Faces Fraud Charges, & BrokersXpress Broker is Suspended Over Private Placement-Related Misconduct

Venecredit Fined $25K for Working with Foreign Finders to Generate Retail Investor Business
According to the Financial Industry Regulatory Authority, Venecredit Securities must pay a $25,000 fine for allegedly using foreign finders to get new retail investor business. The financial firm has now been censured for two years.

The SRO says that the foreign finders served as the primary contacts between Venecredit and the clients and had access to account information via the clearing firm’s platform. These finders worked for a foreign brokerage firm that shares directors and officers with Venecredit and its wholly owned entity. FINRA contends that not only did Venecredit fail to create and put into effect proper supervisory measures that would have allowed it to look at customer complaints about the employees at the foreign brokerage firm, but also it failed to keep electronic correspondence from both the foreign traders and the personal email accounts of its registered representatives.

Ex-Merrill Lynch/LPL Financial Rep. Faces Fraud Charges in Missouri
Missouri Secretary of State Jason Kander has charged former LPL Financial, LLC (LPLA) representative Greg John Campbell with serious misconduct. Prior to working for LPL, Campbell was with Merrill Lynch, Pierce, Fenner & Smith Inc. (MER)

Per the complaint, while registered with both financial firms, Campbell established a line of credit against the brokerage accounts of clients without their knowledge or permission. He then allegedly modified their addresses in their accounts so that they stopped getting their statements and correspondence from the firms and forged account statements for them showing the wrong balances. Using forged signatures, he allegedly moved over a million dollars from these to his accounts without their knowing or consent.

BrokersXpress Broker is Suspended from FINRA and NFA Over Alleged Securities Misconduct
BrokersXpress broker Tracy Morgan Spaeth is suspended from associating with any member of the Financial Industry Regulatory Authority or the National Futures Association. Per FINRA’s disciplinary action, Spaeth failed to ask for or receive the necessary written approval for private placement transactions that occurred between October and December 2010 when he solicited over 100 clients to buy shares in ProfitStars Int’l Corp., raising $8 million in the process. He also allegedly provided a deficient webinar to the investing clients that did not disclose the strategy risks involved and included forecasts about the security’s future performance. Spaeth’s bar from FINRA is two years and he has to pay a $50K fine.

Meantime, the NFA’s suspension of Spaeth comes after his alleged involvement with Profitstars Intl Corp. and International Commodity Advisors, which were both disciplined for using ParagonFX Enterprises, LLC, an unregistered and unregulated company, as a counterparty to the trading of their customers. The organization contends that Spaeth used deceptive and misleading promotional materials to get clients to invest in the companies even though he did not conduct the necessary due diligence on them. NFA says that Spaeth had a deal with a least one of the companies that gave him 50% of gross profits from his clients’ accounts (and perhaps even a referral bonus even if a client suffered a net loss following fees). His bar from the NFA is three years and he has to pay a $5K fine.

If you, your family, friends, neighbors or associates have been subjected to Broker Misconduct, please contact The Resolution Law Group at (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud