Results tagged “FINRA” from Securities Law Blog

March 26, 2014

How To File A Claim With FINRA

In order to begin the arbitration process, a party should file a Statement of Claim with FINRA. This party is called the "claimant." The party against whom the Statement is filed is called the respondent. The Statement of Claim itself should be thorough and include as many details as possible relating to the claim. This information may include the following: relevant dates, names of entities and individuals involved, the type of relief requested, and the respondents from whom the claimant is seeking relief or damages. Claimants may recover actual monetary damages, interest, and/or specific performance. After filing the Statement of Claim, the claimant should file a Submission Agreement and pay filing fees. These fees can be paid by check or paid online.

Claimants can file their claims either online or by mail. To file a claim online, click here to go to the Arbitration Online Claim Filing System. To file a claim by mail, review the Uniform Forms Guide. After creating the necessary documents, submit them with the filing fees to FINRA, One Liberty Plaza, 165 Broadway, New York, NY 10006. When mailing documents, assemble them in the following order: check or money order, submission agreement with additional copies, claim information sheet, Statement of Claim and Exhibits.

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March 17, 2014

What Is FINRA?

The Financial Industry Regulatory Authority, Inc. (FINRA) is a self-regulatory organization, a non-governmental organization that performs financial regulation of member brokerage firms and exchange markets. FINRA's mission is to protect investors by making sure the United States securities industry operates fairly and honestly.

FINRA operates the largest arbitration forum in the United States for the resolution of disputes between customers and member firms, as well as between brokerage firm employees and their firms. Virtually all agreements between investors and their stockbrokers include mandatory arbitration agreements, whereby investors (and the brokerage firms) waive their right to trial in a court of law.

For disputes over $100,000 between customers and member firms, the panel that decides the case generally consists of three arbitrators: one industry (or, at the customer's timely discretion non-industry) panelist, one non-industry panelist, and one non-industry chairperson, according to the Code of Arbitration Procedure for Customer Disputes. For a given case, the two sides are provided separate lists by FINRA of ten local arbitrators for each category from which each party can strike up to four arbitrators and provide a ranking for the rest. Also provided are ten-year biographies and prior award histories for each arbitrator. FINRA will then provide the parties with the panel members by selecting the highest ranked available arbitrator from each category.

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April 2, 2013

FINRA Bars Broker for Unsuitable and Unapproved Securities Transactions Involving 31 NFL Players

According to a FINRA press release, broker Jeffrey Rubin of Lighthouse Point, Florida, is barred from the securities industry for making unsuitable recommendations to invest in illiquid, high-risk securities issued in connection with a now-bankrupt casino in Alabama. Mr. Rubin was barred after after an investigation spearheaded by FINRA's Departments of Enforcement and Member Regulation.

Mr. Rubin, while a registered broker at Lincoln Financial Advisors Corporation and Alterna Capital Corporation, also operated a Florida-based company, Pro Sports Financial. Pro Sports Financial provided financial-related "concierge" services to professional athletes for an annual fee. Rubin recommended that one of his NFL clients invest thr majority of his liquid net worth, approximately $3.5 million, in four high-risk securities. Without informing his employer member firm and without their approval, Rubin recommended and facilitated his client investing $2 million in the now failed Alabama casino project.

Mr. Rubin referred other investors to the casino project while employed by Alterna Capital Corporation and International Assets Advisory, LLC without the firms' knowledge or approval. FINRA found that from approximately January 2008 through March 2011, 30 additional NFL player clients of Mr. Rubin's concierge firm, Pro Sports Financial, invested approximately $40 million in the casino project. These investments provided Mr. Rubin with a 4 percent ownership stake in the defunct casino and $500,000 from the project promoter for these referrals.

FINRA's Executive Vice President and Chief of Enforcement, Brad Bennett, said, "This case demonstrates how broker misconduct can target high-income, inexperienced, and vulnerable investors. Jeffrey Rubin took advantage of professional athletes who placed their trust in him." In settling this matter, Rubin neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

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June 4, 2012

SEC AND FINRA INTRODUCE ADJUSTMENTS TO US TRADING CURBS

The SEC approved two proposals to alter trading curbs meant to curtail volatility in the U.S. stock market, according to a Bloomberg.com article.

A  limit-up/limit-down system that prevents trades at prices outside a specified band has been approved. The article stated that also the SEC has supported changes to broaden circuit breakers instituted after the 1987 market crash. Both programs will be implemented for a one year pilot period, to start next on February 4, 2013.

FINRA oversees more than 4,400 brokers and introduced the curbs for individual stocks in May 2010 and later asked for and received permission to test the limit-up/limit-down system.

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March 16, 2012

FINRA SEES SPIKE IN REGULATORY ACTIONS AND FINES IN 2011

According to this article on law.com, the Financial Industry Regulatory Authority (FINRA) reported an increase in discplinary actions and fines during the year 2011.  FINRA, which oversees brokerage firms, stepped-up its enforcement, with nearly 1,500 actions filed in 2011.  According to the article, FINRA banned 329 individuals from practicing in the industry during 2011, up from 288 in 2010.

FINRA identifies five primary areas of enforcement concern:  advertising, short selling, auction rate securities, suitability, and improper filings.  FINRA's suitability rule requires that a brokerage firm have a reasonable basis for recommending a customer's purchase or sale of a security.  In 2011, FINRA reported $7.7 million worth of suitability fines from 106 cases involving suitability allegations (up from 53 such cases in 2009).

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January 15, 2012

FINRA ARBITRATION PANEL RULES AGAINST MORGAN KEEGAN AND IN FAVOR OF GEORGIA CHARITY IN RMK BOND FUND CASE

According to this news release, Morgan Keegan was ordered by a Financial Industry Regulatory Authority (FINRA) arbitration panel to repay a Georgia charity 115% of its losses in the speculative RMK family of bond funds.  The panel determined that Morgan Keegan wrongfully sold the risky funds to the charity and placed too high a percentage of the charity's investments in the funds.  Notably, the panel also admitted the Georgia Securities Department's Findings of Fact against Morgan Keegan and compelled the testimony of Gary Stringer (Morgan Keegan Director of Investments) and Michele Wood (RMK Fund compliance officer) to testify over Morgan Keegan's objections.

The Frankowski Firm has filed numerous complaints on behalf of investors in the same family of funds and has obtained numerous awards for their clients against Morgan Keegan.

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June 29, 2011

MORGAN KEEGAN GETS HIT WITH REGULATORY SANCTIONS

On April 7, 2010, the securities regulators of four states, the United States Securities and Exchange Commission, and FINRA brought charges against Morgan Keegan, Morgan Asset Management, Mr. James Kelsoe and key Morgan Keegan employees alleging that they participated in a massive fraud in connection with the purchase, sale, marketing, pricing and public filings of all of the RMK funds.

All of these complaints allege violations of the anti-fraud provisions of state and federal laws or FINRA's rules and all of them point to the basic similarity of all of the RMK funds.  As described at ¶ 16 of the State complaint:

All six (6) Funds were largely invested in the lower, implicitly leveraged and most risky "tranches," or slices, of structured debt instruments...The Funds were comprised of many of the same holdings... The Funds were highly correlated, meaning they behaved like each other under similar market conditions.  The combination of risky lower tranche holdings, mirrored holdings among the Funds, and the high correlation of the Funds caused investors owing more than one of these funds to have a heightened risk due to over-concentration.

On June 22, 2012, Joseph P. Borg, Director of the Alabama Securities Commission (ASC); Robert Khuzami, Enforcement Director of the U.S. Securities and Exchange Commission (SEC), and Brad Bennett, Executive Vice President and Enforcement Director of the Financial Industry Regulatory Authority (FINRA), announced the entry of consent orders and administrative orders against Morgan Keegan, Morgan Asset Management, and some of their employees.

The investigation and findings centered around the seven proprietary mutual funds sold by Morgan Keegan broker dealers to over 30,000 account holders.   Those seven Morgan Keegan funds lost approximately $1.5 billion from March 31, 2007 through March 31, 2008.

Beginning on page 22 of the Alabama Securities Commission Consent Order, the Commission set out the penalties imposed on Morgan Keegan, Morgan Asset Management, and James Kelsoe:

  • MKC, MAM, and Kelsoe will CEASE AND DESIST from violating the [Alabama Securities] Act, and will comply with the Act (¶ 4);
  • Pursuant to this Alabama Consent Order and related Consent Orders of the States of Tennessee, South Carolina, Kentucky, the offer of settlement in SEC Admin. Proceeding and the FINRA Letter of Acceptance, Waiver and Consent, MKC and MAM shall pay in resolution of all of these matters, within ten (10) days of the entry of the SEC order the sum of Two Hundred Million Dollars ($200,000,000.00).... (¶ 5);
  •  MKC and MAM shall pay the sum of One Million Seven Hundred Ten Thousand Three Hundred Eighty Seven Dollars ($1,710,387.00) to the ASC as a monetary settlement and investigative costs.... (¶ 6);
  •  MKC and MAM shall also pay the sum of Twenty-three Thousand Dollars to the North American Securities Administrators Association ("NASAA") as reimbursement for its costs, expended on states behalf (¶ 7);
  •  Kelsoe shall cause to be paid the sum of Fifty Thousand Dollars ($50,000.00) to the ASC as a monetary penalty.... (¶ 8);
  •  As additional consideration for the dismissal of the administrative proceeding by the ASC, Kelsoe does hereby agree to the revocation of all existing registrations and/or licenses and to an Order of Permanent Bar.... (¶ 9);
  •  MKC, MAM, and all of their existing and future affiliates and subsidiaries are prohibited from creating, offering or selling a proprietary fund that is a registered investment company and is marketed and sold to investors other than institutional and other qualified investors...for a period of two (2) years from the entry of the first of the State Consent Orders to be entered in this matter.... (¶ 12);
  •  MKC and MAM shall provide, for a period of three (3) years, to all of their registered agents and investment adviser representatives mandatory, comprehensive, and ongoing (i) product/offering training on each of the proprietary products/offerings that they sell or recommend to clients, and (ii) training on suitability and risks of investments generally.... (¶ 18);
  •  One person shall not simultaneously hold the positions of General Counsel and Chief Compliance Officer for either Respondent.  (¶ 21);
  •  Respondents MKC, MAM, and Kelsoe agree not to make or permit to be made any public statement denying, directly or indirectly, any findings in this Consent Order or creating the impression that this Consent Order is without factual basis.... (¶ 25)   

Beginning on page 10 of The Securities and Exchange Commission June 22, 2011 Order Making Findings and Imposing Remedial Sanctions, the SEC set out the penalties imposed on Morgan Keegan, Morgan Asset Management, and James Kelsoe.  Key sanctions include:

  • Morgan Keegan shall not, for a period of three years from the date of the Order, be involved in, or responsible for, recommending to, or determining on behalf of, a registered investment company's board of directors or trustees or such company's valuation committee, the value of any portfolio security for which market quotations are not readily available;  (¶ 32A)
  • Morgan Asset shall not, for a period of three years from the date of the Order, be involved in, or responsible for, recommending to, or determining on behalf of, a registered investment company's board of directors or trustees or such company's valuation committee, the value of any portfolio security for which market quotations are not readily available; (¶ 34A)
  • Morgan Keegan and Morgan Asset undertake to, pursuant to and in compliance with this Order and with orders being entered in Joint Administrative Proceedings...and the sanctions described in Financial Industry Regulatory Authority Letter of Acceptance, Waiver and Consent, jointly and severally pay the total sum of $200 million, including disgorgement, interest and penalties to be ordered in this matter; (¶ 36)
  • Kelsoe undertakes to, pursuant to and in compliance with this Order and with orders being entered in the State Proceedings, pay $500,000 in penalties...; (¶ 37)
  • Respondents Morgan Keegan and Morgan Asset are censured;  (¶ IV A)
  • Respondent Morgan Keegan shall cease and desist from committing or causing any violations any future violations of, Section 34(b) of the Investment Company Act and Rules 22c-1 and 38a-1 promulgated under the Investment Company Act; (¶ IV B)
  • Respondent Morgan Asset shall cease and desist from committing or causing any violations and any future violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, and Section 34(b) of the Investment Company Act and Rules 22c-1 and 38a-1 promulgated under the Investment Company Act; (¶ IV C)
  • Respondent Kelsoe shall cease and desist from committing or causing any violations and any future violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, and Section 34(b) of the Investment Company Act and Rules 22c-1 and 38a-1 promulgated under the Investment Company Act; (¶ IV D)
  • Respondent Kelsoe be, and hereby is barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and is prohibited from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter; (¶ IV F)
  • Respondent Kelsoe be, and hereby is, barred from participating in any offering of a penny stock, including:  acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock; (¶ IV G)
  • Respondents Morgan Keegan and Morgan Asset shall jointly and severally pay disgorgement of $20,500,000 and prejudgment interest of $4,500,000 to the Securities and Exchange Commission, and a civil penalty of $75,000,000 to the Securities and Exchange Commission, within ten (10) business days of the entry of this Order; (¶ IV K)
  • Respondent Kelsoe shall pay a civil penalty of $250,000 to the Securities and Exchange Commission, within ten (10) days of this Order.

Regions Bank, the parent company of Morgan Keegan, is now trying to sell Morgan Keegan.

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January 4, 2008

FINRA Probes Mortgage Securities Sales

David Scheer and Jesse Westbrook of Bloomberg report that U.S. regulators, concerned brokerages may have sold clients money-losing securities tied to subprime mortgages, are seeking information about how the investments were marketed, a person familiar with the situation said.The Financial Industry Regulatory Authority, which polices about 5,100 brokerages, sent letters Dec. 14 to more than a dozen firms that sell collateralized mortgage obligations, a type of security linked to home-loan payments, said the person, who declined to be identified because the inquiry isn't public. One letter obtained by Bloomberg seeks sales spreadsheets, marketing materials, and procedures and methods for matching products to clients' investment needs.

Mounting losses from securities tied to home loans are prompting regulators to examine how Wall Street firms valued and promoted the products. Finra Chief Executive Officer Mary Schapiro said in September the agency was scrutinizing sales of mortgage-backed products to retirees, and had sent a round of letters seeking information on the transactions.

To read the full article click here.

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