FINRA LAWYER BLOG

FINRA operates the largest securities dispute resolution forum in the United States.  Virtually all disputes between customers and brokerage firms are resolved by arbitration before FINRA.  Similarly, virtually all disputes between employees and brokerage firms are likewise resolved by arbitration before FINRA.

It is common in any arbitration that a party may seek documents or testimony from a non-party.  If the non-party is a FINRA member or an employee of a FINRA member, the arbitrators are free simply to “order” that person or company to testify or supply documents (FINRA Rule 12513).  However, does the jurisdiction of FINRA arbitrator extend to companies or persons that are not FINRA members or employees of FINRA members? The answer is, kind of sort of yes, but with some wrinkles.

Let me explain and take it from the top.  First, the laws in the United States favor arbitration.  The Federal Arbitration Act (ʺFAAʺ), 9 U.S.C. § 1 et seq., ʺreflects a legislative recognition of ʹthe desirability of arbitration as an alternative to the complications of litigation.ʹʺ  Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir. 1987).  Thus, one question is:  does FINRA even have a rule which permits an arbitrator to issue a subpoena to a non-member or an individual not employed by a member?  The answer is, yes:  FINRA Rule 12512 states, “Arbitrators shall have the authority to issue subpoenas for the production of documents or the appearance of witnesses.”

Did you recently lose a serious amount of money because you took the bad advice given to you by your broker? If so, don’t despair. There may be a way for you to recoup the money that you invested. You may even be able to sue for punitive damages on top of the amount that you recently lost. To do so, you will need to contact a firm of experienced NYC investment fraud attorneys.

Don’t Let a Faulty Adviser Drain Your Investment Account

If you were misled by a negligent or incompetent financial adviser, you may have recourse to the law. If you can prove that they intentionally misled you, mismanaged your funds, or otherwise behaved in an unlawful manner, you may be able to file a claim against them in arbitration.

You need to get on the phone to an experienced New York City investment fraud lawyer as soon as you suspect wrongdoing by a financial advisor. It’s best to take action immediately because all claims are subject to statutes of limitation and can be lost if not timely filed.

When you have a FINRA arbitration case, it can be confusing if you are not familiar with the process. Since arbitration differs from a traditional court hearing, you need an attorney on your side who not only understands the FINRA arbitration process, but who has also helped clients obtain favorable outcomes. If you have an upcoming FINRA case, here are some ways arbitration can help turn the tide in your favor.

Non-Public and Confidential Hearings
If you find yourself involved in a court hearing, it will almost certainly be a matter of public record. However, an arbitration hearing is far more confidential, with the only information available publicly being that which is posted on the FINRA Arbitration Awards online database.

Greater Power Over Who Hears Your Case
Unlike a court hearing where you may have little control over which judge presides over your case and who sits on a jury, a FINRA arbitration hearing will allow you greater power over who rules on your case. In most situations, a panel of three arbitrators who are deemed to be qualified and neutral will decide the outcome of the hearing. Thus, by working with NYC securities arbitration attorneys at Herskovits PLLC you will have experienced lawyers on your side who are familiar with selecting individuals for this panel.

If you are the target of an investigation by the Securities and Exchange Commission, do not assume it will go away on its own. Instead, it may linger for months or years, all the while you face the possibility of fines, loss of license and your job or business, and the possibility of criminal charges if the SEC refers your matter to the Department of Justice. When this happens, the smart thing to do is to become aware of the investigation as soon as possible and hire legal representation. If you need to know more about SEC investigations, here are some important details to keep in mind, as well as how New York securities attorneys at Herskovits PLLC can help you navigate this complex process.

Tips and Referrals
For an SEC investigation to begin, the agency usually relies on tips and referrals from various sources, such as:

–Tips from customers, coworkers, or whistleblowers
–Congressional referrals where constituent has complained to Congressperson
–Referral from state regulators

When a registered representative leaves a broker-dealer, there are many different service and compliance issues that emerge. There are also competing interests between the firm and the representative, each of whom want to keep the customer’s business. At the same time, the customer wants to maintain steady and uninterrupted service. FINRA Regulatory Notice 19-10 sets forth obligations that members must follow when a registered representative departs a firm. Herskovits PLLC can assist firms and registered representatives that need assistance in understanding or implementing FINRA’s directives.

It is common in the industry for registered representatives to move between firms. FINRA expects that the firms and representatives continue to prioritize the customers’ interests when a registered representative leaves the firm. First and foremost, the firm must inform the customer how their account will continue to be serviced after the representatives moves from the firm. Then, the firm must provide its customers with full and complete answers when the firm is asked about the representative who is leaving.

Firms must ensure that the customers know that they have the option to keep their account at the firm and have the account serviced by a new representative. They must also provide the contact of the departing representative to the customer if the representative has given their consent to their contact information being distributed. In other words, customers must be able to make their own choice about what to do with their account.

Joseph Kim, a young Chicago trader just pleaded guilty to stealing $3 million worth of cryptocurrency from the firm that employed him and investors. The case, which involves charges of wire fraud, is the first criminal prosecution for cryptocurrency related violations in the city.

The 23-year-old trader who appeared before Judge Andrea Wood, could potentially be sent to prison for as long as 20 years. He will be sentenced in October, and he may also be ordered to pay back over a million dollars in restitution.

According to the prosecutors´ allegations, the defendant took $3 million from his firm and over half a million from investors. His goal was to make up for losses he incurred due to disadvantageous trades made on his personal account. While he attempted to return some of the Litecoin and Bitcoin he stole from his firm, Consolidated Trading, he still owed over $1.1 million when the misconduct came to light.

If you exchanged an official email with any SEC employee recently, you have seen the banner for Howeycoins Travel Network. And if you like to get in on a profitable deal, you probably thought, “well, if the SEC is endorsing them, these guys must be legit.” Perhaps you clicked on the banner to see what it was all about. If so, you must have been surprised at what you found.

Pre-initial coin offering deals usually promise spectacular returns, and HoweyCoins are not the exception. The attractive website for the ICO shows alluring scenes from luxury travel destinations. As you scroll down, you will quickly find that HoweyCoins will yield returns of at least 1 percent daily.

If you are not sold yet, the HoweyCoins.com site quickly boasts, “The average registered coin return over a two month period in 2017 was an amazing 72%.”

Ever since it was implemented, brokers have relied on the Protocol for Broker Recruiting to be able to take some of their clients with them when they leave a firm, but a recent ruling by a state court in Georgia might jeopardize the Protocol’s protections.

The Appeals court’s ruling concluded the case against four former Aprio brokers, who failed to give 60 or 90 days’ notice before moving to Morgan Stanley, as it was established in their employment agreements.

Instead of giving Avrio a heads up, they announced they were leaving and quit on the same day. As soon as they had a foot out the door, they reached out to all their clients, in an attempt to bring them over to Morgan Stanley. Naturally, many followed, and Aprio lost a significant amount of business.

The head of Massachusetts’ state securities regulatory body, Secretary of the Commonwealth William F. Galvin, issued a public statement announcing an inquiry into the practices of some of the top local broker-dealers related to private placement investments.

These funding rounds of securities, which are not sold through a public offering, but rather, presented to a select group of investors, commonly involve a higher risk of fraud.

The list of companies that have already received an inquiry letter from Galvin’s office includes, among others, Arthur W. Wood, Bolton Global Capital, Advisory Group, Santander Securities, LPL, U.S. Boston Capital, and BTS Securities.

FINRA has announced it will increase its scrutiny of the cryptocurrency market. As several regulatory bodies endeavor to establish their jurisdiction over the crypto space, FINRA will now boost its oversight of registered firms’ participation in its burgeoning market.

In a new regulatory notice, the self-regulatory organization asked its 3,700 member firms to notify it if they trade in cryptocurrency, accept cryptocurrency from clients, manage crypto funds, participate in the sale of digital tokens, or even offer advice relating to cryptocurrency.

FINRA will also monitor virtual currency mining and any other related use of blockchain technology.