FINRA Fines Down in 2017

According to a recent article in ThinkAdvisor online, the Financial Industry Regulatory Authority (FINRA) is paying more in restitution, while its fines levied and number of disciplinary cases pursued in the first half of 2017 are down. The data was compiled by FINRA’s Disciplinary and Other FINRA Actions publications and press releases from January through June 2017. According to that, FINRA ordered $38.1 million in restitution during the first six months of 2017, which could mean a 171% increase from the total restitution reported in 2016, and a 21% decrease from the record-setting amount in 2015, ($96 million.) But, out of the $38.1 million in restitution during the first six months, $24.6 million of that is attributed to one litigated case. The overall fines look to be a downward trend. During the first half of 2017, FINRA reported $23.5 million in fines compared to $79.4 million during the first half of 2016. This is a drop of more than 70%. FINRA also reported 459 disciplinary actions during the first six months of this year, a 16% decline compared to the first six months of 2016 (547 disciplinary actions.)

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FINRA Cannot Be Sued By Brokers Who Claim Unfair Arbitration Against Former Firms

Recently, a Chicago federal judge dismissed a lawsuit against the Financial Industry Regulatory Authority (FINRA) saying that it cannot be sued by brokers who claim an unfair arbitration against their former firms. Nicholas Webb and Thad Beversdorf had filed a breach of contract suit against their former employer, Jeffries & Co. Inc. claiming FINRA failed “to enforce and promote just and equitable principles of trade and business, to maintain high standards of commercial honor and integrity and to prevent fraudulent and manipulative acts and practices” and “to create fair, just and equitable results for disputes to be decided on their merits.” The judge dismissed the suit with prejudice on the grounds that FINRA possessed arbitral immunity. Webb and Beversdorf were fired by Jeffries and Co. in October 2013 for alleged “poor performance.” The men then alleged breach of contract, retaliation, violations of wage and hour statutes and fraudulent conduct. They then concurrently sued FINRA for breach of contract, alleging FINRA violated its contract with them by failing to provide arbitrators with the proper authority, procedural mechanisms, discretion and training to “facilitate a just and equitable resolution of the pending disputes.”

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PNC Investments Moves To Reverse $1.8 Million FINRA Arbitration Decision

According to Bank Investment Consultant, PNC Investments has challenged an arbitration decision by the Financial Industry Regulatory Authority (FINRA) that ordered the bank to pay a former registered representative $1.8 million for defamation and wrongful termination. The broker, Adrienne Mennemeyer, a specialist with PNC in Wentzville, Missouri, claimed that the firm unjustly ended her employment and made false statements on her Form U-5. She claims this hindered her ability to earn a living in the securities industry and ended her employment with the firm. Last week, PNC filed a complaint in federal court, claiming that it exceeded its authority by disregarding the law. It also claimed that the $1.8 million award was contrary to public policy. PNC claimed that Mennemeyer was terminated for dishonesty and violating bank policy, and that this was reflected on her Form U-5. Mennemeyer claimed that the reason she was fired was because of her boyfriend’s behavior a week before her termination.

According to her online FINRA BrokerCheck report, Mennemeyer was previously registered with Edward Jones in St. Peters, Missouri from December 2009 until January 2012, PNC Investments in Wentzville, Missouri from January 2012 until December 2013, SagePoint Financial in Phoenix, Arizona from October 2015 until November 2015. She is currently not registered within the industry. You may be able to sue PNC Investments if you suffered losses with them. To find out how, please call our securities law firm today at 312-332-4200 in order to speak with an attorney for free. There is no obligation with the call.

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FINRA Claims To Examine Unpaid Arbitration Awards and High-Risk Brokers

According to a recent InvesmentNews article, the Financial Industry Regulatory Authority (FINRA) will address unpaid arbitration awards and high-risk brokers with disciplinary histories. FINRA will “consider proposed rule amendments and other steps designed to heighten the oversight of high-risk brokers and the firms that employ them.” The FINRA board will also decide whether to put into play amendments to its arbitration procedures and Form U4 regarding payment of arbitration awards by firms and brokers. Last year, a study by the Public Investors Arbitration Bar Association (PIABA) showed that $62 million in arbitration awards were not paid to investors in 2013. That is about 25% of the total owed to investors for damages that year. Last month, Senate Democrats called on FINRA to create a fund to compensate investors for unpaid arbitration claims.

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Broker-Dealers Continue To Get Hit By SEC

According to a recent InvestmentNews article, the enforcement actions against broker-dealers by the Securities and Exchange Commission (SEC), were up by 20% in the first half of the government’s fiscal year and now account for a quarter of all enforcement actions by the agency. This is according to a report from Cornerstone Research. Last year, the SEC’s actions against broker-dealers accounted for one-fifth of the SEC’s enforcement activities. The SEC filed 334 enforcement actions during the fiscal year’s first half, down from 372 filings during the same period a year earlier, largely due to a 50% decrease in actions against delinquent filers. 80% of the SEC actions filed continued to come in the form of administrative proceedings rather than civil actions. There was a jump of 34% in issuer reporting and disclosure actions, and a 34% increase in actions related to securities offerings. Actions involving allegations of insider trading and violations of the Foreign Corrupt Practices Act decreased.

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FINRA, SEC, FINCEN Investigate Aegis Capital

The Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) and The Financial Crimes Enforcement Network (FINCEN) are investigating broker-dealer Aegis Capital. According to a recent InvestmentNews article, the filing did not state why Aegis Capital was being investigated. The report was filed at the end of January. The firm has 16 branches, with the majority of them in the New York City or Melville, Long Island area. In August 2015, the company settled with FINRA, agreeing to pay $950,000 over allegations of improper sales of billions of shares of unregistered penny stocks and anti-money-laundering supervisory lapses. Two chief compliance officers of the firm were suspended and fined over the charges. During this time, the firm’s president and CEO, Robert Eide, was suspended for 15 days and fined $15,000 for failing to disclose more than $640,000 in outstanding liens. If you invested money with Aegis Capital, you may be able to recover those losses by calling our law firm at 312-332-4200 and speaking to an attorney for free. There is no obligation. We may be able to bring a claim against the firm for losses. We sue firms in the FINRA arbitration forum.

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SEC Approves FINRA Rule On Financial Exploitation With Minimum Requirements

According to yesterday’s InvestmentNews article entitled “Elder abuse prevention by advisers depends on their firms’ response to new rule,” the Securities and Exchange Commission (SEC) approved a rule by the Financial Industry Regulatory Authority (FINRA) designed to protect seniors and the elderly. Under the new rule, firms must make a reasonable attempt to collect information for a trusted third-party contact for investors and allows brokers to halt disbursements from accounts of clients they think are being taken advantage of. The order by the SEC stated: “These measures will assist members in thwarting financial exploitation of seniors and other vulnerable adults before potentially ruinous losses occur.” The rule is to take effect in February 2018. The rule leaves it up to the brokerage firm to take the necessary steps in order to prevent elder abuse, but does not actually require the firms to do anything. Under the rule, brokers may put a hold on accounts of potential abuse victims but does not include penalties for those who fail to do so. Meanwhile, many states are expected to approve rules that would require advisers to report suspected senior abuse to authorities. Many are likely to be based upon a model rule by the North American Securities Administrators Association (NASAA).

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Rogue Brokers Still a Danger To Investors

According to a recent InvestmentNews article, the Financial Industry Regulatory Authority (FINRA) made monitoring rogue brokers a top priority in 2017. In its annual regulatory and examination priorities letter, it created a dedicated team to keep track of the rogue brokers. Hundreds of brokers are still employed in the industry, and pose a danger to investors, as they transition from firm to firm. Reitrees and elderly investors are most affected by these brokers. Brokers with disclosure events on their records are rampant, and firms such as Newbridge Securities are no stranger to brokers with disclosure events. A former Newbridge broker, Gerald Cocuzzo, pled guilty to securities fraud in November for his role in a $131 million market manipulation scheme. Guy Amico, another broker, was barred because he failed to reasonably supervise a broker at his firm when he held a supervisor position. Amico was then allowed to reapply to the securities industry after two years.

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Former Morgan Stanley Broker Forced To Pay $1 Million in Clawback

A Financial Industry Regulatory Authority (FINRA) arbitration panel is forcing Jeffrey Hunter Smith, a former broker with Morgan Stanley, to pay the firm back over $480,000. Morgan Stanley won damages, interest and legal fees from Smith over promissory note and back-end agreement breaches. Smith was barred from the industry by FINRA four months before the panel’s decision. According to his Letter of Acceptance, Waiver and Consent (AWC), he took $300,000 in loans from Morgan Stanley clients without getting the firm’s required permission or disclosing it. The panel found that not only did Smith violate loan rules, but he violated “high standards of commercial honor and just and equitable principles of trade.” In addition to Morgan Stanley’s victory over Smith, the bank also clawed back over $406,000 in damages, interest and legal fees from former broker Beverly B. Carroll and over $118,000 in damages, interest and legal fees from former broker Brian Richardson Castillo. Both cases had to do with unpaid promissory notes.

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FINRA Planning To Investigate Up To 200 Brokers Who Pose Great Risk To Investors

According to yesterday’s InvestmentNews article entitled “FINRA’s new exam unit looking to identify rogue registered reps,” FINRA will identify up to 200 rogue registered representatives who pose the greatest risk to investors, according to a senior official with FINRA. The authority plans to call broker-dealer compliance executives when it sees a high-risk broker to determine if the firm is aware of that fact, and to find out what kind of heightened supervision will be necessary. FINRA recently implemented a dedicated examination unit to identify and examine brokers who may pose a high risk to investors. This unit will then review brokers’ compliance with rules regarding suitability, know-your-customer, outside business activities, commissions and fees and private securities transactions. A University of Chicago and a University of Minnesota study last year found that 7% of financial advisers had been disciplined for misconduct, and such brokers make up about 20% of some firms. FINRA will then go to the firms where the individuals were hired to focus on whether those changes and heightened supervision are being implemented and kept up.

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