The Resolution Law Group: FINRA Considers System That Would ‘Red Flag’ Customer Accounts at Brokerage Firms

The Financial Industry Regulatory Authority is looking at a system that would let the SRO run analytics on the customers accounts at brokerage firms that would allow it to identify “red flags” involving business and sales misconduct involving branches, firms, and registered representatives. The agency is now seeking comments for its proposal for the Comprehensive Automatic Risk Data System (CARDS).

Upon implementation of CARDS, clearing firms and self-clearing firms would regularly turn in, in standardized, automated format, specific data about customer accounts and the customers accounts of each member account that they clear for. This would allow FINRA to conduct analytics so it can identify excessive commissions, churning, markups, pump and dump scamps, and mutual fund switches. The information would also be used to examine broker-dealers.

FINRA says it wants to be able to find the risks and red flags earlier. According to a notice from the SRO, the agency says that this type of automated reporting would get rid of some of the one-off reporting that brokerage firms now have to engage in. This would also let FINRA compare broker-dealers and identify trends and patterns in the industry.

CARDS is part of FINRA’s efforts, since the 2008 financial crisis, to go from depending on individual financial firm exams to surveillance that is broader and occurs on an ongoing basis. The SRO says it conducted a successful trial of CARDS earlier in 2013. 300 introducing firms were involved.

To make CARDS a working reality, brokers might have to gather historical data. Meantime, clearing firms would need to construct a system that would let them turn in the information and oversee data transmission. FINRA CEO and Chairman Robert Ketchum said that the purpose of CARDS isn’t to “replace the compliance officer.” He said the SRO wants to be able to swiftly place attention on firms and their branches where there may be a “concentration in assets that are more likely to be hit.”

The Resolution Law Group works with institutional investors and high net worth individual investors to get back their money that they lost due to securities fraud. Contact our broker fraud law firm today.

The Resolution Law Group: SEC Considers Imposing Proxy Adviser Rules

The US Securities and Exchange Commission is looking at whether proxy advisers have become so influential when it comes to corporate elections that rules should be imposed in them to create greater transparency. At a recent SEC-hosted meeting, brokers, institutional investors, business groups, and unions debated about the role that proxy advisors Glass Lewis & Co. LLC and Institutional Shareholder Services Inc. have played in shareholder voting.

According to Bloomberg, research from non-profit organization Conference Board reports that with the growth in institutional investors’ percent of voting shares going up by over 50% there has been a growing demand for proxy research. However, there is concern by some that proxy advisors have a lot of power over the governance decisions of public companies yet they don’t have to contend with much Commission oversight. Critics think proxy advisors influence shareholders to vote blindly on proxy measures without getting disclosures about possible conflicts. Meantime, supporters of proxy advisors say that they provide an important service—especially to small institutional investors that lack the resources to assess every vote they make.

Mutual funds, pensions, and other mutual funds tend to be proxy advisers’ typical clients. SEC Commissioner Daniel Gallagher attributes proxy advisers’ “outsized role” to policy guidance issued by the agency in 2009 telling investment advisers they could fulfill an obligation to vote in the best interests of shareholders by depending on third party research.

It was just this year that Glass Lewis & Co. LLC and Institutional Shareholder Services Inc. consented to abide by a European Securities and Markets Authority recommendation that they obey a voluntary conduct code about disclosing the way they make recommendations and manage conflicts of interest. Still, Business Roundtable & the US Chamber of Commerce have asked for more disclosures.

The Resolution Law Group represents investors with securities claims against financial firms, investment advisers, brokerage firms, brokers, and others. Contact our securities fraud law firm today.

The Resolution Law Group: Court Says SLUSA Precludes JPMorgan Mutual Fund Practices, Provident Royalties Ex-Executives to Pay $2.3M, & Two Securities America Advisers Are Rehired

SLUSA Precludes JPMorgan Securities Allegations Involving Mutual Fund Sales
As preempted by the Securities Litigation Uniform Standards Act, the U.S. District Court for the Northern District of Illinois dismissed what would have been a would-be state law class action against JPMorgan Securities LLC (JPM) and related entities over mutual-fund sales practices that allegedly maximized defendants’ revenues at cost to fund investors. Per the securities lawsuit, financial advisers were pressured and given incentives to sell the defendants’ proprietary mutual funds rather than ones run by third parties, placing their own financial interests before those of clients. The would-be class includes advisory clients from 2008 through that paid management fees and had assets in the defendants’ proprietary funds.

The defendants sought to have the case dismissed, contending that the claims alleging fraud related to the buying and selling of securities are precluded by SLUSA. The district court concurred, with Judge John Darrah noting that although the complaint presented state law claims involving breaches of fiduciary duty and contract, the allegations’ substance describes a fraudulent scam to sell securities.

Provident Royalties’ Former Executives to Pay $2.3M, Get Prison Time
Earlier this month, four ex-Provident Royalties executives that were involved in the firm’s infamous $500M oil and gas Ponzi scam, received their jail sentences. They also will have to pay $2.3 million in restitution. The men had pled guilty earlier to conspiracy to commit mail fraud over the financial scheme.

Now, Brendan Coughlin and Henry Harrison must serve 21 months in federal prison, while Paul Melbye will serve 18 months. W. Mark Miller is going to prison for six months with another six in home confinement. (Miller was Provident’s CEO and then president, while the other three men founded and ran the firm. Another co-founder, Joseph Blimeline, is already sentenced to 12 years behind bars.)

Prosecutors contend that investors lost their money because of the way Blimeline handled investor capital and that the other three co-founders attempted to conceal his actions or reveal to investors how much trouble the firm was in, allowing them to bring in another $2.3 million. Many broker-dealers that sold Provident Royalties private placements ended up going out of business as a result of their involvement with the sales.

Two Financial Advisors Resume Working at Securities America
Seven years after leaving Securities America Inc., financial advisers Mark Slattery and Shannon Casey are back. The two of them founded CaseSlattery Wealth Partners and they went on to spend more than 10 years at the independent brokerage firm before taking their business to SII Investment Inc. in 2006. Slattery has made clear that they didn’t leave because of anything to do with Securities America but more because they felt like they needed to switch brokerage firms after leaving American National Bank’s investment department, which they ran, and setting up their own advisory firm.

The return of Slattery, who started his career with LPL Financial Holdings Inc. (LPLA) and whose firm oversees $130 million in client assets, is good for Securities America, which took a huge hit a couple of years back because of its sale of private placements that went awry. After that, a lot of financial advisers left. It wasn’t until Ladenburg Thalmann & Co. Inc. (LTS) went on to buy Securities America from Ameriprise Financial (AMP) that the negative buzz around the brokerage firm stopped. Per the end of this year’s first quarter, Securities America was managing $16 billion in client assets and 1,729 advisers.

The Resolution Law Group represents institutional and individual investors that have sustained losses due to Securities Fraud.

If you feel you are the victim of Securities 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: 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

FINRA Orders Wells Fargo & Banc of America’s Merrill Lynch Ordered to Pay $5.1M for Floating-Rate Bank Loan Funds Sales

The Financial Industry Regulatory Authority Inc. says that Merrill Lynch, Pierce, Fenner & Smith Incorporated (MER) and Wells Fargo Advisors LLC must pay $5.1 million for losses sustained by customers who bought floating-rate bank loan funds.

According to the SRO, brokers at Banc of America and Merrill recommended the purchase of floating-rate bank loan funds to customers who didn’t have investment goals, risks tolerance, or financial conditions that were consistent with the features and risks of these kinds of mutual funds. Instead, these were customers whose risk tolerance levels were conservative and wanted to preserve principal. FINRA says that the sale recommendations were made even though there wasn’t reason to believe that floating-rate bank loan funds would be suitable for these investors.

In regards to the allegations against Wells Fargo, FINRA, in its acceptance, waiver and consent letter, said that brokers there warned about the funds but that the firm failed to act on their worries. The SRO says that the brokers had even confused the funds with bank certificates of deposit and other less risky investments.

Now, Wells Fargo Advisors, which is Wells Fargo Investments, LLC successor must pay $1.25 million and pay back 239 customers about $2 million in losses while Merrill Lynch, as Banc of America Investment Services, Inc.’s successor most pay 214 customers about $1.1 million and a $900,000 fine. By settling, the two financial firms are not denying or admitting to the allegations. They are, however, consenting to an entry of FINRA’s findings.

It was in July 2011 that the SRO issued a warning to investors about going after returns in floating-rate loan funds. These funds tend to invest in loans that financial institutions extend to entities that have lower than investment-grade credit quality. The companies that put out these high interest rate loans usually posses a high debt-to-equity ratio. Meantime, the loans’ yields are usually higher than investment-grade bonds. A fund invested in these loans can be appealing in a rising or low interest rate atmosphere because along with higher yields, the funds’ interest rate goes up when rates rise.

That said, the market for floating-rate loans is pretty unregulated and the loans don’t trade on an organized change. This makes them generally illiquid and hard to value. Often, funds that invest in these loans are promoted as products that aren’t as vulnerable to fluctuation in interest rate while providing inflation protection. That said, the loans in the fund are subject to substantial liquidity, credit, and valuation risk.

If you sustained losses in floating-rate bank loan funds and you feel that these funds were recommended to you even though they may not have been suitable for your investment needs or goals, you may have grounds for a FINRA arbitration case or a securities fraud lawsuit. Contact our The Resolution Law Group today 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