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On January 16th, a settlement was reached to create new fiduciary committees to handle a complex transition at the bankrupt Woodbridge firm, following a SEC lawsuit over a billion-dollar Ponzi scheme run by Woodbridge founder Robert Shapiro, who will now be totally excluded from the restructuring process.

Upon approval of the settlement, Judge Kevin Carey said, “As a condition for approval I require that that if any services beyond transition services are to be desired by the debtor, you need court approval with or without SEC consent.”

After Woodbridge filed for bankruptcy, Shapiro allegedly continued having access to company offices, and was paid a monthly $175,000 consulting fee. By designing a new team with no links to Shapiro to facilitate the transition, the settlement ensures decisions will now be made in the defrauded investors’ best interest.


FINRA recently sanctioned Citigroup Global Markets Inc. $11.5 million over inaccurate research rating displays. The sanction includes a $5.5 million in fines and $6 million in compensation for wronged retail customers.

According to the SRO’s findings, over at least five years, Citigroup displayed inaccurate research ratings for a large number of equity securities, also incurring several related violations.

Firms communicate their equity research ratings to share their opinion about the projected performance of public securities. The ratings are included in emails to customers, account statements, and official websites. They are also disseminated internally, to inform brokers’ recommendations to customers.

Recently, several cryptocurrency scams have come to light: dishonest individuals advertising their newly concocted crypto-coin as the next big thing, with a potential to make millions for investors willing to take the risk.

FINRA recently issued an Investor Alert to warn investors about purchasing shares in companies advertising new cryptocurrencies.

The document focused on recent experiences of companies marketing shares through, “unrealistic predictions of exponential returns and unsubstantiated claims,” which can often be signs of “a classic ‘pump and dump’ scam.”


Last December, FINRA made public its 2018 budget and updated Financial Guiding Principles, after approval by the SRO’s Board of Governors. In a new information release, the SRO also detailed several rule proposals for the year and planned improvements to its registration technology.

As part of one of its five annual meetings, the Board also met with SEC Chairman Jay Clayton to align priorities, especially relating to both FINRA and the SEC’s focus on protecting retail investors.

Several of the proposed changes are a response to concerns raised during FINRA’s CEO’s “listening tour” and other industry engagement programs.


In a commentary that appeared in the Wall Street Journal, Jay Clayton, chairman of the Securities and Exchange Commission, and J. Christopher Giancarlo, chairman of the Commodity Futures Trading Commission, referred to the new regulation scenario for cryptocurrency trading.

In fact, they expanded the concept to ”distributed ledger technology (DLT)” defined as “an array of new financial products, including cryptocurrencies and digital payment services.”

Emphasizing the potential of DLT as the “next great driver of economic efficiency,” the regulators made it clear that the SEC and the CFTC will focus on enforcing rules and ensuring market integrity to protect retail investors looking to invest in cryptocurrencies and initial coin offerings (ICOs).


In line with its expressed intent to increase its oversight over the cryptocurrency market, the Commodity Futures Trading Commission has filed three related fraud suits in a single week.

The third lawsuit targets the creators of “My Big Coin,” who allegedly used $6 million dollars received from buyers to pay off early investors and shop for luxury items. The allegations caused the freezing of all assets belonging to the creators of the supposed next-big-cryptocurrency.

The Nevada-based company, My Big Coin Pay Inc.; was founded by Randall Crater. The suit, filed in January, also named one of its salesmen, Mark Gillespie. According to the allegations, between 2014 and mid-2017, the defendants defrauded 28 investors out of six million dollars.


In conversation with Chip Jones, FINRA’s Senior Vice President of Member Relations and Education, Mike Rufino, Executive Vice President and Head of FINRA Member Regulation—Sales Practice expanded on Robert Cook’s 2018 Priorities Letter, which was released during the first days of the year.

Rufino explained how FINRA plans to examine brokers to determine whether they should be included in the High-Risk Registered Representatives Program, and made some key recommendations to firms for identifying high-risk brokers within their ranks.

In his 2018 Regulatory and Examination Priorities Letter, FINRA CEO Robert Cook signaled “identifying high-risk firms and individual brokers and mitigating the potential risks that they can pose to investors,” as a “top priority” for the self-regulatory organization in the New Year.


Based on research conducted by the National Center on Elder Abuse, 16% of elder abuse was caused by financial exploitation, which ranked third followed right after self-neglect and neglect by others. This percentage had increased from 12.3% since 2001; however, elder abuse is vastly under reported. According to one study, only 1 in 44 cases of financial abuse is ever reported. In many cases, cognitive impairment and the need for help with activities of daily living make elderly victims particularly vulnerable to financial abuse.

With baby boomers turning into senior citizens, financial exploitation of seniors has become an increasingly serious issue for securities industry regulators.

No financial product is per se unsuitable for senior investors; however, a senior’s investment time span and other factors may impact whether certain products or strategies are suitable.


According to former Securities and Exchange Commission Chair Mary Jo White, the SEC insufficient examination of registered investment advisors is a “disaster waiting to happen.”

Without adequate oversight, misconduct at small advisory firms could be building up for years. While FINRA and state regulators vet half of all registered broker-dealers annually, the SEC only manages to examine 12% of RIAs every year.

Speaking at the Practicing Law Institute in New York, White expressed her concern about the SEC’s failing oversight of the independent space. “It’s a real problem that keeps me up at night,” she commented.

In a move that could be categorized as ‘seismic,’ Morgan Stanley has decided to quit the Protocol for Broker Recruiting. Originated in 2004, the document created a methodology to engineer the departure of brokers from one firm to join another.

Since then, it has protected departing brokers from litigation and temporary restraining orders, and ensured they do not share client information with their new firm without the clients’ consent.

For nearly 13 years, we have observed brokers moving between firms, and clients following them, more often than not. Meanwhile, brokerages have tried to train new recruits who can hold on to the clients of more experienced advisers. Now, Morgan Stanley will no longer be restrained by the Protocol, and they will likely go after departing brokers (who have taken their clients with them) much more aggressively.

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