Wednesday, November 30, 2016

Don't Overstate Your Book!

Today's lesson - do not overstate your book when changing firms.

While that seems to make sense, apparently it escapes some folks that if you tell your prospective employer that you have $700,000 in annual revenue, and you have zero, they are going to catch on to your lie soon enough, and they are going to be upset.

A FINRA arbitration panel recently ordered a broker to pay Jeffrey Matthews Financial Group $260,000 after the broker failed to appear at the arbitration hearing. The arbitration decision does not provide any details, but Investment News has the back story.

Apparently Jeffrey Matthews Financial Group was not happy when it learned that it's recent hire, who claimed to have $700,000 in revenue in his book, did not bring in a single client to the firm, and the firm decided that the $700,000 representation was not true. The firm sued for $200,000, which was the bonus they gave the broker, and although the broker filed an answer, he did not appear at the hearing.

The arbitration panel awarded the firm $260,000.

There is an unanswered questions however - how did the BD not verify the trailing 12? Simple process to do so, and because it did not, it was out $200,000, paid its attorneys to bring the claim, and now has to attempt to enforce the award against the broker.

A little more time in the hiring process might have avoided all of his.

Finra panel: Broker owes former employer $260,000 after allegedly overstating book of business


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Sallah Astarita & Cox is a national law firm representing brokers and investors across the country in securities litigation and regulatory matters. Visit the firm at their website, call 212-509-6544 or email them to see if they can help you with your securities law matter.



Tuesday, November 29, 2016

Finra fines Lincoln Financial broker-dealer $650,000 for failing to protect client data

Didn't we do this already?

FINRA fined Lincoln Financial last week for failing to secure client data. But 5 years ago, FINRA fined Lincoln Financial for failing to secure client data.

http://www.finra.org/newsroom/2011/finra-imposes-fines-totaling-600000-against-lincoln-financial-securities-and-lincoln

What the heck is going on? $600,000 in fines does not send home the message that confidential client information needs to be protected? So we fine them another $600,000?

Is is possible that Linclon believes that $100,000 a year in fines is cheaper than securiing its data centers?

Is is possible that FINRA needs to start fining the senior executives in order to drive home the point?


Finra fines Lincoln Financial broker-dealer $650,000 for failing to protect client data



Monday, November 28, 2016

SEC Creates National Database of Individual Trades - CARDS Rising from the Dead?

We all remember CARDS - FINRA's ill conceived plan to store and maintain information regarding every trade made by every person in our national markets. The plan was a disaster from the start, for many reasons, but one of the main reasons being the collection of all of that data by a private entity (FINRA), in one place, inclluding information regarding invidual investors. Sorry, but most thinking folks don't trust the government, or a private entity, or FINRA, to securely store that information and keep it protected from hackers. Plus, why would we allow the government to keep such detailed information on every single investment made by every single investor?

Well, we are going to have that happen. 
The SEC has approved an NMS plan to create a single, comprehensive database known as the consolidated audit trail (CAT) that the SEC and regulators believe will enable regulators to more efficiently and thoroughly track all trading activity in the U.S. equity and options markets. 

It will also create a database of trades, by investor, that the government can troll through at will.
The NMS plan details the methods by which SROs and broker-dealers will record and report information. While the goal is to obtain a range of data elements that together provide the complete lifecycle of all orders and transactions in the U.S. equity and options markets, those data elements include a unique identifier for the customer!
While the NMS plan also sets forth how the data in the CAT will be maintained to ensure its accuracy, integrity and security, there is no information as to what a unique customer identifier means, and you can be sure that someone will think it clever to use the customer's last name, or the last four digits of the customer's SSN, which can, ultimately, be reversed into the identity of the customer.
And why should the government have a record of every trade executed by every individual in the entire country?

SEC.gov | SEC Approves Plan to Create Consolidated Audit Trail

Friday, November 25, 2016

SEC News - Manipulation, Fraud, and FCPA Charges


Company Co-Founder Charged in Manipulation Scheme
The co-founder of a Minnesota-based energy company has been charged with manipulating its stock price and concealing his control of the company to attain lucrative financial payouts.



Audit Partner Charged in Failed Audits of Venture Capital Fund
The SEC has announced proceedings against a PricewaterhouseCoopers audit partner who served as engagement partner for the independent audits of a venture capital fund.



Firm and Partner Charged With Issuing Fraudulent Audit Reports
A New York-based audit firm and a senior partner agreed to settle charges that they issued fraudulent audit reports in connection with municipal bond offerings by the town of Ramapo, N.Y., and its local development corporation.



Investment Adviser Fraudulently Overbilled Clients, Stole Assets for Personal Expenses
A Los-Angeles based investment advisory firm and its owner face charges for fraudulently overbilling clients and stealing assets from their trusts to pay such personal expenses as his home mortgage, overseas trips, and leases on two Mercedes-Benz vehicles.



Embraer Paying $205 Million to Settle FCPA Charges
The SEC announced a global settlement along with the U.S. Department of Justice and Brazilian authorities that requires aircraft manufacturer Embraer S.A. to pay more than $205 million to resolve alleged violations of the Foreign Corrupt Practices Act (FCPA).

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

President Trump to Gut the SEC?

New administration, new priorities. Given Mr. Trump's desire to cut the federal budget, in part by cutting regulations, it is not a surprise that cutting enforcement of those regulations would be part of his plan.

On analysis by the New York Times notes that the new attorney general could be Rudolph W. Giuliani. Like most, he is going to want to put new priorities in place, and with the promised spending cuts to improve infrastructure, the SEC can expect a reduced enforcement budget. The SEC has reported annual increases in the number of enforcement filings.

However, there may be a change in the SEC's authority in administrative hearings outside of federal court. The Dodd-Frank Act gave the agency the authority to obtain penalties against any defendant in these proceedings, which gave the SEC the ability to use its questionably consititutional private proceedings against non-registered individuals. This abuse has been the subject of much controversy, and is undoubtedly a target of those who wish to trim Dodd-Frank, its related expenses, and abuses.

How Trump’s Presidency Will Change the Justice Dept. and S.E.C. - The New York Times:




Senator Pushes FINRA to Hurry Reviews of Fired Wells Fargo Brokers

Wells Fargo & Co. is facing increasing scrutiny from lawmakers over the potentially wrongful dismissals of financial advisers and other employees who pushed back on questionable practices during the bank's multiyear cross-selling scandal.
The latest salvo comes from Sen. Bob Casey (D., Pa.), who, in a letter Wednesday to the Financial Industry Regulatory Agency, the brokerage industry's self-regulatory body, asked for an expedited review process to determine whether any Wells Fargo employees were unfairly dismissed as retribution for speaking out or not cooperating with aggressive cross-selling tactics, according to the letter reviewed by The Wall Street Journal.
FINRA in response to an earlier inquiry from lawmakers, said that of the 5,300 employees fired during a five-year period, more than 600 from Wells Fargo's wealth-management division had received termination filings known as Form U5s. These forms chronicle the reasons for the dismissals of brokerage employees, and negative justifications can hinder an adviser from gaining employment elsewhere in the industry."

Senator Pushes Finra to Hurry Reviews of Fired Wells Fargo Brokers


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The attorneys of Sallah Astarita & Cox have decades of experience in representation of brokers in expungements and other  U4 and U5 issues. Call them at 212-509-6544 or send an email. for more information on correcting your CRD record

Things Your Investment Advisor Should Never Do

Interesting view from an educator site - a must read for financial professionals as well as investors

Things Your Investment Advisor Should Never Do - FamilyEducation

Wednesday, November 23, 2016

SEC News - Misleading Investors and Fraud


Firm Charged With Misleading Investors About Binary Options Profitability
An Israeli-based firm must pay more than $1.7 million for misleading investors into trading binary options over the internet, and the agency warned that other firms may be out there actively trying to do the same thing.

Movie Producer Charged With Defrauding Hedge Fund Investors
A former movie producer and self-proclaimed private equity executive has been charged with defrauding investors in hedge funds and using the money he stole to support his extravagant lifestyle.

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the defense of enforcement actions. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.

FINRA Seeks More Power For Bogus Reasons

 While FINRA's desire to be able to react to market manipulation in an expedited fashion is a laudable goal, we must be careful about giving FINRA too much power. FINRA is not a government regulator - it is a private organization whose executives make millions of dollars a year, is funded by the industry, and has the ability to crush the smaller broker-dealers.

As with most private corporations, FINRA seeks to expand its power and reach whenever it can. Remember its attempt to regulate Investment Advisers? Its attempt to obtain and store every investor's private investment data? We need to be careful.

FINRA claims that it needs the ability to crack down more quickly on manipulative trading practices in the securities markets and is allegedly concerned that it has no quick means to stop disruptive trading activity after it has been identified without resorting to proceedings that can take years to complete,

This is simply nonsense. Putting aside the fact that the entire controversy is apparently based on a limited number of claims of "spoofing" and "layering" FINRA routinely refers cases to the SEC, and the SEC has the ability to immediately issue a temporary cease and desist order. So does every State regulator. It also claims that since it does not have jurisdiction over foreign entities it needs to have the ability to issue expedited cease and desist orders. What? FINRA only has jurisidction of those who are registered with it, and a cease and desist order by FINRA, directed at someone who it does not have jurisdiction over, is not enforceable.

There is simply no need to give FINRA the ability to file expedited proceedings where it can impact the operations of innocent firms and brokers, without any evidence of wrongful conduct, and without constitutional protections that apply when the SEC or the States take the same action


FINRA moves to speed up market manipulation crackdowns | Reuters:

Monday, November 21, 2016

Morgan Stanley Sweetens Recruiting Deals

 According to On Wall Street after overhauling its recruiting deals in light of new regulatory guidance on the fiduciary rule, Morgan Stanley is again tweaking its transition package for elite brokers.

The wirehouse is sweetening the deal for advisers in the top quintile, offering up to 175% of a broker's 12-month trailing production to move, according to two people familiar with the matter.

However, there is no back end - because of the fiduciary rule.

Morgan Stanley sweetens recruiting deals | On Wall Street

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The attorneys at Sallah Astarita & Cox have decades of experience in recruiting and broker transition matters, having negotiated packages and separation agreements with every major broker-dealer. To speak to one of their partners, call 212-509-6544.