Recently in FINRA News Category

April 9, 2014

FINRA Begins Retrospective Rule Review

FINRA issued two new Regulatory Notices recently in order to review rules on an ongoing basis. Regultatory Notice 14-14 requests comments on FINRA's communications with the public rules, and Regulatory Notice 14-15 requests comments on gifts, gratuities, and non-cash compensation rules. FINRA's rule reviews are targeted toward ensuring their rules stay relevant and are effectively designed to achieve their ends.

FINRA's review process is completed in two stages. In the first stage, the findings stage, FINRA evaluates rules as they currently operate. In the second stage, the action stage, FINRA will engage in the rule-making process if it is found to be warranted in the first stage. FINRA then organizes rules for review and will consider a number of factors in order to complete the process. The regulatory notices identify specific rules FINRA has noted for review and ask for comment on a series of questions pertaining to the efficacy of those rules.

If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

March 26, 2014

Arbitrator Lies About Being A Lawyer, Booted

James H. Frank of Santa Barbara, California may have jeopardized the outcomes of almost forty securities arbitrations, some of which date back to more than fifteen years. According to a FINRA spokeswoman, Frank misrepresented himself as being a lawyer and a member of the bar in a number of states. FINRA removed Frank from its roster of arbitrators last year. Frank vehemently denies these allegations, claiming that they are "inaccurate at best" and that the California bar must have lost his records. Additionally, he is unsure as to why FINRA removed him from their roster of arbitrators.

This debacle raises several concerns moving forward. First, this incident adds fuel to the fire for those who oppose mandatory arbitration. This case will certainly hurt perceptions regarding the fairness of arbitration proceedings. Second, the parties involved in Frank's cases are unsure as to whether they can overturn some of his decisions in court. Typically, in such instances when a party wants to overturn an arbitration award in federal court, they must make a request within ninety days of receiving the order. As of now, it is unclear whether petitioners will be granted some flexibility on this issue due to the arbitrator's fraudulent misrepresentations.

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.

Continue reading "How To File A Claim With FINRA" »

March 24, 2014

FINRA Warns Against Leveraged ETFs

Several brokerage firms have stopped selling leveraged exchange traded funds (ETFs) after the Financial Industry Regulatory Authority Inc. warned brokers that they "typically are unsuitable for retail investors" who hold them longer than a day.

Exchange Traded Funds (ETFs) are funds that track indexes like the NASDAQ-100 Index, S&P 500, Dow Jones, etc. When you buy shares of an ETF, you are buying shares of a portfolio that tracks the yield and return of its native index. The main difference between ETFs and other types of index funds is that ETFs don't try to outperform their corresponding index, but simply replicate its performance. They don't try to beat the market, they try to be the market.

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Edward Jones banned the sell of ETFs shortly after the announcement and LPL prohibited the sale of leveraged ETFs that seek more than two times the long or short performance of the target index.

However there are still those in the industry that are touting the viability and virtues of leveraged ETF's and are trying to get these firms to begin selling these types of funds again.

Continue reading "FINRA Warns Against Leveraged ETFs" »

March 11, 2014

The Commodity Futures Trading Commission Investigating Managed Future Funds

The Commodity Futures Trading Commission (CFTC) is investigating the sky high fees that are charged to investors in managed futures funds. This comes after a December 19, 2013 letter that the Senate's Special Committee on Aging sent to the CFTC asking them to work with the Securities and Exchange Commission (SEC) on investigating the fees and the means for their disclosure when associated with retirement accounts.

A managed future fund is a variety of alternative investment that is overseen by the CFTC. These funds are normally sold to consumers via brokers. Fund managers then invest in futures, which are financial contracts in which the buyer promises to buy an asset at a predetermined date in the future. Such futures obligations typically obligate the buyer to purchase assets like global commodities (goods and services), and foreign currencies, among other speculative financial instruments.

A review of these funds has shown that over 89% of the gains of $11.51 billion these funds posted were eaten up by fees, commissions, and expenses of the fund managers. As The Economist describes hedge fund fees, it is "easy to think of people who have become billionaires by managing hedge funds; it is far harder to think of any of their clients who have got as rich."

What is worse is many of these fees are not adequately disclosed to investors. The National Futures Association (NFA), a self-regulating watchdog organization that oversees the trading of commodities and futures, does not require managers of managed futures funds to disclose how their fees impact investor profits over time. And given that these funds are sold to investors by brokers, it is not likely a broker would disclose that all of the gains from the fund are likely to be eaten up by these fees.

In the December 19 Senate Committee letter that has prompted the CFTC probe, Senators Bill Nelson and Elizabeth Warren wrote: "Clearly, individual investors, especially senior investors looking to find a suitable place to place their retirement savings, should be made aware of these managed-future funds' fees and commissions and the draining effect upon their investments. Although these funds are purported to be for sophisticated investors, some of these firms have a very low minimum investment that can be made from an Individual Retirement Account (IRA). We are very concerned about the potential impact these fees could have on the retirement security of the Americans who invest in these funds."

Continue reading "The Commodity Futures Trading Commission Investigating Managed Future Funds" »

March 7, 2014

Securities and Investment Lawyers Petition Congress For More Disclosures From FINRA's BrokerCheck

A group of securities and investment attorneys has asked Congress to provide more information to consumers about the brokers that handle their money. FINRA does not go as far as some U.S. state securities regulators do in providing disclosures to investors, the group said. The report raises questions about whether the Financial Industry Regulatory Authority's BrokerCheck service provides all the information investors need to choose a broker.

Some examples of the kind of information that BrokerCheck omits are reasons why a broker was fired in the past, bankruptcy for more than ten years ago, criminal charges, and other issues that an investor should know about their broker. This is true even though FINRA and states get the information that is disseminated via BrokerCheck from a larger database that has most of this information.

"Immediate legislative change is needed to prevent consumers from being misled into believing that BrokerCheck reports are comprehensive when they are not," The Public Investors Arbitration Bar Association (PIABA) wrote in the report.

The PIABA report also stated that another important issue with FINRA: a Wall Street Journal investigation found that the public records of some 1,600 brokers failed to include criminal charges and other problematic issues that should have been in their files.

FINRA oversees nearly 636,000 brokers and 4100 brokerages.

More than 75 percent of state securities regulators refer investors to BrokerCheck from their websites,

Continue reading "Securities and Investment Lawyers Petition Congress For More Disclosures From FINRA's BrokerCheck" »

July 3, 2012


The SEC has adopted the FINRA communication rule, which has some noticeable changes from the previous NASD rule, according to the article on One noticeable change was the consolidation of the six communication categories into three- institutional communication, retail communication and correspondence. The article further illuminated the difference between retail and institutional correspondence, per FINRA and The SEC.

There are also many other requirements set forth by FINRA and the SEC putting forth standards for retail and institutional communication as well as review procedures for such communication. The article also states that a "public appearance" is no longer a separate category and will fall under the new guidelines and requirements of the communication rule.


June 27, 2012


"Bond funds" and "income funds" are terms used to describe a type of investment company (mutual fund, closed-end fund or unit investment trust (UIT)) that invest primarily in bonds or other types of debt securities. Depending on its investment objectives and policies, a bond fund may concentrate its investments in a particular type of bond or debt security--such as government bonds, municipal bonds, corporate bonds, convertible bonds, mortgage-backed securities, zero-coupon bonds--or a mixture of types. The securities that bond funds hold will vary in terms of risk, return, duration, volatility and other features.


June 26, 2012


According to a recent article, July 2, 2012 will be the launch date for a new FINRA program that will allow more flexibility in large arbitration cases. The new program will be for claims $10 million dollars or more and allow them to shape their cases and bypass some of the FINRA arbitration rules, the article explains.

While the majority of FINRA arbitrations are not dealing with disputes at the $10 million dollar mark, those roughly 6,500 cases are very time consuming and expensive going through the traditional FINRA process. If the program is a success, FINRA plans on asking the SEC to formalize it.


June 4, 2012


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


May 2, 2012


According to a FINRA press release Morgan Stanley, UBS, Wells Fargo and Citigroup have all been fined by the financial regulatory authority.

For a year and a half, the firms did not have adequate systems in place to supervise the sale of leveraged and inverse ETFs.  FINRA also found that the firms did not conduct adequate due diligence in determining the risks and features of the ETFs.  The press release further stated that the firms kept investors in ETF holdings for much longer than they should have been in, especially with the volatile market during the relevant time period.


March 16, 2012


According to this article on, 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).