Featured Posts

J.P. Morgan Sued For Edward Turley’s Alleged Misconduct: $55 Million!

The Law Offices of Robert Wayne Pearce, P.A. has filed another case against Ex-J.P. Morgan broker Ed Turley for alleged misrepresentations, misleading statements, unsuitable recommendations, and mismanagement of Claimants’ accounts. The Law Offices of Robert Wayne Pearce has filed another case against J.P. Morgan Securities for alleged misrepresentations, misleading statements, unsuitable recommendations, and mismanagement of Claimants’ accounts continuing in fall 2019 and thereafter by Edward Turley (“Turley”), a former “Vice-Chairman” of J.P. Morgan. At the outset, it is important for our readers to know that our clients’ allegations have not yet been proven. IMPORTANT: We are providing information about our clients’ allegations and seeking information from other investors who did business with J.P. Morgan and Mr. Turley and had similar investments, a similar investment strategy, and a similar bad experience to help us win our clients’ case. Please contact us online via our contact form or by giving us a ring at (800) 732-2889. Latest Updates on Ed Turley – November 18, 2022 The Advisor Hub reported today that the former star broker with J.P. Morgan Advisors in San Francisco Edward Turley agreed to an industry bar rather than cooperate with FINRA’s probe of numerous allegations of excessive and unauthorized trading that resulted in more than $100 million worth of customer complaints. FINRA had initiated its investigation of Edward Turley as it related to numerous customer complaints in 2020. The regulator noted in its Acceptance Waiver and Consent Agreement (AWC) that the investors had generally alleged “sales practice violations including improper exercise of discretion and unsuitable trading.” According to Edward Turley’s BrokerCheck report, he had been fired in August 2021 for “loss of confidence concerning adherence to firm policies and brokerage order handling requirements.” On October 28th, FINRA requested Turley provide on-the-record testimony related to his trading patterns, including the “use of foreign currency and margin, and the purchasing and selling of high-yield bonds and preferred stock,” but Edward Turley through counsel declined to do so. As a result, Edward Turley violated FINRA’s Rule 8210 requiring cooperation with enforcement probes, and its catch-all Rule 2010 requiring “high standards of commercial honor,” the regulator said and he was barred permanently from the securities industry. Related Read: Can You Sue a Financial Advisor or Stockbroker Over Losses? Turley Allegedly Misrepresented And Misled Claimants About His Investment Strategy The claims arise out of Turley’s “one-size-fits-all” fixed income credit spread investment strategy involving high-yield “junk” bonds, preferred stocks, exchange traded funds (“ETFs”), master limited partnerships (“MLPs”), and foreign bonds. Instead of purchasing those securities in ordinary margin accounts, Turley executed foreign currency transactions to raise capital and leverage clients’ accounts to earn undisclosed commissions. Turley over-leveraged and over-concentrated his best and biggest clients’ accounts, including Claimants’ accounts, in junk bonds, preferred stocks, and MLPs in the financial and energy sectors, which are notoriously illiquid and subject to sharp price declines when the financial markets become stressed as they did in March 2020. In the beginning and throughout the investment advisory relationship, Turley described his investment strategy to Claimants as one which would generate “equity returns with very low bond-type risk.” Turley and his partners also described the strategy to clients and prospects as one “which provided equity-like returns without equity-like risk.” J.P. Morgan supervisors even documented Turley’s description of the strategy as “creating portfolio with similar returns, but less volatility than an all-equity portfolio.” Note: It appears that no J.P. Morgan supervisor ever checked to see if the representations were true and if anybody did, they would have known Turley was lying and have directly participated in the scheme. The Claimants’ representative was also told Turley used leverage derived from selling foreign currencies, Yen and Euros, to get the “equity-like” returns he promised. Turley also told the investor not to be concerned because he “carefully” added leverage to enhance returns. According to Turley, the securities of the companies he invested in for clients “did not move up or down like the stock market,” so there was no need to worry about him using leverage in Claimants’ accounts and their cash would be available whenever it was needed. The Claimants’ representative was not the only client who heard this from Turley; that is, he did not own volatile stocks and not to worry about leverage. Turley did not discuss the amount of leverage he used in clients’ accounts, which ranged from 1:1 to 3:1, nor did Turley discuss the risks currency transactions added to the portfolio, margin calls or forced liquidations as a result of his investment strategy. After all, Turley knew he could get away without disclosing those risks. This was because J.P. Morgan suppressed any margin calls being sent to Turley’s clients and he liquidated securities on his own to meet those margin calls without alarming clients.  This “one-size-fits-all” strategy was a recipe for disaster. J.P. Morgan and Turley have both admitted that Turley’s investment strategy was not suitable for any investor whose liquid net worth was fully invested in the strategy. It was especially unsuitable for those customers like Claimants who had other plans for the funds in their J.P. Morgan accounts in fall 2019 and spring 2020. Unfortunately, Turley recommended and managed the “one-size-fits-all” strategy for his best clients and friends, including Claimants. Turley was Claimants’ investment advisor and portfolio manager and required under the law to serve them as a “fiduciary.” He breached his “fiduciary” duties in making misrepresentations, misleading statements, unsuitable recommendations, and mismanagement of Claimants’ accounts. The most egregious breach was his failure to take any action to protect his clients at the end of February 2020, when J.P. Morgan raised the red flags about COVID-19 and recommended defensive action be taken in clients’ accounts. Turley Allegedly Managed Claimants’ Accounts Without Written Discretionary Authority Claimants’ representative hired Turley to manage his “dry powder,” the cash in Claimants’ accounts at J.P. Morgan, which he would need on short notice when business opportunities arose. At one point, Claimants had over $100 million on deposit with J.P. Morgan. It was not...

Keep Reading

Investors With “Blown-Out” Securities-Backed Credit Line and Margin Accounts: How do You Recover Your Investment Losses?

If you are reading this article, we are guessing you had a bad experience recently in either a securities-backed line of credit (“SBL”) or margin account that suffered margin calls and was liquidated without notice, causing you to realize losses. Ordinarily, investors with margin calls receive 3 to 5 days to meet them; and if that happened, the value of the securities in your account might have increased within that period and the firm might have erased the margin call and might not have liquidated your account. If you are an investor who has experienced margin calls in the past, and that is your only complaint then, read no further because when you signed the account agreement with the brokerage firm you chose to do business with, you probably gave it the right to liquidate all of the securities in your account at any time without notice. On the other hand, if you are an investor with little experience or one with a modest financial condition who was talked into opening a securities-backed line of credit account without being advised of the true nature, mechanics, and/or risks of opening such an account, then you should call us now! Alternatively, if you are an investor who needed to withdraw money for a house or to pay for your taxes or child’s education but was talked into holding a risky or concentrated portfolio of stocks and/or junk bonds in a pledged collateral account for a credit-line or a margin account, then we can probably help you recover your investment losses as well. The key to a successful recovery of your investment loss is not to focus on the brokerage firm’s liquidation of the securities in your account without notice. Instead, the focus on your case should be on what you were told and whether the recommendation was suitable for you before you opened the account and suffered the liquidation.

Keep Reading

FINRA Arbitration: What To Expect And Why You Should Choose Our Law Firm

If you are reading this article, you are probably an investor who has lost a substantial amount of money, Googled “FINRA Arbitration Lawyer,” clicked on a number of attorney websites, and maybe even spoken with a so-called “Securities Arbitration Lawyer” who told you after a five minute telephone call that “you have a great case;” “you need to sign a retainer agreement on a ‘contingency fee’ basis;” and “you need to act now because the statute of limitations is going to run.”

Keep Reading

A Stockbroker’s Introduction to FINRA Examinations and Investigations

Brokers and financial advisors oftentimes do not understand what their responsibilities and obligations are and what may result from a Financial Industry Regulatory Authority (FINRA) examination or investigation. Many brokers do not even know the role that FINRA plays within the industry. This may be due to the fact that FINRA, a self-regulatory organization, is not a government entity and cannot sentence financial professionals to jail time for violation of industry rules and regulations. Nevertheless, all broker-dealers doing business with members of the public must register with FINRA. As registered members, broker-dealers, and the brokers working for them, have agreed to abide by industry rules and regulations, which include FINRA rules.

Keep Reading

More Posts

Can a Lawyer Help Investors with Unauthorized Trading?

The Law Offices of Robert Wayne Pearce, P.A. has experience handling unauthorized trading and investor disputes with broker-dealers. Our unauthorized trading lawyers understand the complexities of securities law, as well as the impact that unauthorized trading can have on an investor’s financial future. Brokers must get approval from clients before making trades in a standard brokerage account. When a broker makes a trade (or trades) without first discussing this with their client, this is known as unauthorized trading. If you’ve been a victim of unauthorized trading and suffered financial losses, there is hope – you may be able to recover your money.  But you must call us at (800) 732-2889 promptly to avoid ratification and waiver defenses the financial advisors lawyers will raise to avoid paying you back! What is unauthorized trading? Unauthorized trading is any purchase or sale of securities made on behalf of a client without prior permission, knowledge or consent. FINRA Rule 2510(b) prohibits brokers from buying or selling securities in non-discretionary brokerage accounts without talking to customers and getting their approval. This may also be considered a violation of FINRA’s standards for commercial honor, fair trade practices, and prohibitions against manipulative or fraudulent behavior (FINRA Rule 2010 and FINRA Rule 2020). Unauthorized trading doesn’t apply to discretionary accounts. A discretionary account is an account in which the broker has been granted authority (prior written authority) to make decisions regarding investments and the brokerage firm has approved the account for discretionary trading. How to Spot Unauthorized Trading To prevent unauthorized trading, it’s important to stay on top of your investment account. Here are some tips to help you spot it: Remember, the quicker you report unauthorized trading, the stronger your case will be. So don’t hesitate to take action if you suspect something’s amiss. Have You Suffered Investment Losses Due to Unauthorized Trading? If you think your broker made unauthorized trades, it’s important to act. A securities lawyer can help you understand the situation and figure out the next steps. Contact us today at (800) 732-2889 or fill out one of our short contact forms. Can You Sue Your Broker for Unauthorized Trading? Yes, you can sue your broker for unauthorized trading. Investment loss claims are most often addressed through arbitration, which is governed and regulated by FINRA. The FINRA arbitration process allows investors to resolve disputes with their brokerage firms without having to go to court. The arbitration process tends to be faster and less expensive than a traditional lawsuit. If you’ve suffered financial losses due to unauthorized trading, our experienced securities attorneys can help you file a claim against the broker-dealer. We are here to fight for your rights as an investor. Contact us today for more information. Related Read: Can You Sue a Financial Advisor or Stockbroker Over Losses? Do You Need an Unauthorized Trading Lawyer? It is crucial to have an attorney who understands the complexities of securities law, as well as the rules that brokers must abide by when dealing with clients’ accounts. Making the wrong choices now could result in losing your ability to recover any losses. A good unauthorized trading attorney knows how to avoid the ratification and waiver defenses! At the Law Offices of Robert Wayne Pearce, P.A., our attorneys understand how difficult it is for investors when brokers breach their fiduciary duty and make unauthorized trades. We are here to help you get the compensation that you deserve for your losses. We’ve been helping investors recover lost money for over 40 years. Our track record speaks for itself. We’ve helped recover over $160 million for our clients. Contact the Law Offices of Robert Wayne Pearce, P.A. today to learn how we can help you with your unauthorized trading dispute. We provide free consultations, so don’t wait – schedule yours now and get the legal help you need.

Continue Reading

What is a Breach of Fiduciary Duty?

Breaches of fiduciary duty are unfortunately common. Given that fiduciary duty is the highest legal standard of care, any failure to uphold this responsibility can have severe consequences for those who have been entrusted with a fiduciary duty. An investment loss recovery attorney can help you take action against a fiduciary who has acted negligently or wrongly. What is a Breach of Fiduciary Duty? Breach of fiduciary duty occurs when an individual, such as a financial advisor, that has been entrusted with managing the affairs of another fails to act in good faith and is negligent or malicious in their duties. Investment loss? Let’s talk. or, give us a ring at 561-338-0037. A fiduciary is bound to act in the best interests of their client, and when they fail to do so, it can lead to significant financial losses. If you believe you are dealing with investment loss due to a breach of fiduciary duty, you should strongly consider hiring an investment loss attorney. The quicker you reach out, the quicker you can begin the process of recovery. The Law Offices of Robert Wayne Pearce, P.A., offers free consultations. Give us a call at (800) 732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve. Four Elements of a Breach of Fiduciary Duty Case To prove a breach of fiduciary duty, four key elements must be demonstrated: the existence of a fiduciary duty, a violation of that duty, resulting harm, and a causal connection between the breach and the harm. Duty – There Exists a Fiduciary Duty There must be an established fiduciary relationship between you and the other party for the fiduciary to owe you a duty. To hold a fiduciary accountable to their standard of care, it is essential to demonstrate that they knowingly accepted the role. This is typically shown through a written agreement between the parties, such as a customer agreement. Breach – There Was a Violation of This Duty Fiduciaries are required to work in the best interests of their clients, and any deviation from this standard may constitute a breach. To demonstrate a breach of fiduciary duty, one must have evidence that the individual holding this responsibility acted negligently or maliciously—or prioritized their own interests over yours. This can include lost investments, diminished value of your assets, outright theft, decisions made without your consent, or failure to carry out one’s fiduciary responsibility. You can also prove a breach through the fiduciary’s failure to act—for example, not disclosing a conflict of interest. It is best to speak with an investment fraud lawyer to determine if your fiduciary failed in their responsibility and contributed to your losses. Damages – The Breach of Duty Resulted in Harm to You For there to be a legitimate claim of breach of fiduciary duty, the breach must have caused you to suffer damages. Proving there was a breach is not enough for a valid claim of breach of fiduciary duty. Unless you can demonstrate how the violation of fiduciary duty directly caused you to suffer damages, your claim may not be successful. Damages can be either economic or non-economic, such as mental anguish.  Causation – There is a Connection Between the Breach and the Harm There must be a direct link between the fiduciary’s breach and harm to you. If you incurred damages that cannot be connected to the individual’s breach, your claim may not be successful. Breach of Fiduciary Duty Examples Breaches of fiduciary duties can take many forms. A fiduciary must act in the best interests of their client. When they fail to do so, serious harm can result. Examples of a breach of fiduciary duty include misrepresentation or failure to disclose information, excessive trading, unsuitable investments, failure to diversify, and failure to follow instructions. Misrepresentation or Failure to Disclose Information If a financial advisor does not present a client with all material information about an investment, this is a breach of fiduciary duty. Material information is what a reasonable investor would consider important when deciding whether to invest.  Sometimes financial advisors will mislead investors by omitting information, such as risk factors or any negative information about a stock.  Excessive Trading Excessive trading, also known as churning, in your account is a breach of fiduciary duty. Financial advisors will make large numbers of trades solely to generate more commissions for themselves.  Unsuitable Investments Financial advisors must “know their customer” before making investment recommendations. This includes understanding the client’s investment objectives, risk tolerance, time horizon, financial standing, and tax status. The advisor breaches their fiduciary duty if they make an unsuitable investment, even with the best intentions.  Failure to Diversify Your financial advisor must recommend a mix of investments so that your assets are properly allocated among various asset classes and industries. Failing to diversify your portfolio puts you in a position of great risk and is a breach of fiduciary duty. If your assets are over-concentrated in a particular stock or sector, you may experience significant losses if the company or industry does not perform well.  Failure to Follow Instructions When you give instructions to your financial advisor, they have the fiduciary duty to promptly perform your orders. If your advisor fails to follow your instructions in a timely manner and you suffer financial losses, you can recover. Can You Pursue a Lawsuit for a Breach of Fiduciary Duty? Yes, you can pursue a lawsuit for a breach of fiduciary duty. You will need to speak with an investment fraud lawyer to determine if your fiduciary failed in their responsibility and contributed to your losses. It is important that you prove there was a breach, damages were caused, and the breach was directly connected to the harm you suffered in order for your lawsuit to be successful. Do you believe you’ve been the victim of a breach of fiduciary duty? Don’t wait – contact an experienced investment fraud attorney as soon as possible to learn more about your legal rights and options. Contacting a lawyer who specializes in investment fraud can help ensure that your legal rights are protected and allow you...

Continue Reading

Selling Away: Definition, Examples, and How to Recover Losses

The securities industry is one of the most regulated, largely because of the high potential for fraud and abuse. Various laws and regulations protect investors by imposing requirements on securities transactions and the people who facilitate them. Individual brokers and brokerage firms must be registered and licensed with the Financial Industry Regulatory Authority (FINRA) before they are permitted to conduct securities transactions. FINRA also administers a number of exams that provide certification for selling specific kinds of securities. All of these regulations exist to protect investors from fraudulent conduct by brokers. Nevertheless, brokers occasionally attempt to skirt the rules and offer private deals to their clients. Not only do these transactions violate FINRA rules, they also pose additional risks for investors. What Is Selling Away? Selling away describes the practice of selling securities in unauthorized private transactions outside the regular scope of the broker’s business. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. Brokerage firms maintain a list of approved securities their brokers are allowed to offer. By approving products ahead of time, brokerage firms ensure that their brokers sell only securities that are vetted and verified as legitimate products. Brokers sell away when they offer their clients securities not on the firm’s approved product list. Brokers may sell away if they want to make extra commissions without sharing with their firm. Selling away is not always malicious; sometimes, a broker means well but isn’t able to offer the securities a client wants through normal channels. Regardless of the broker’s intent, however, FINRA prohibits selling away and sanctions brokers for doing so. Common Examples of Selling Away While there is no specific form a selling-away transaction takes, they frequently involve certain types of investments. These investments include: Deals that involve selling away often exhibit the same red flags as other types of investment fraud, like Ponzi schemes. Excessively high or consistent returns are indicators that the deal is probably too good to be true. What Are the Risks of Investing in Securities That Are Sold Away? Investments of all kinds carry a certain level of risk. However, investing in a selling-away deal carries more risk because they come without the safeguards that accompany approved investments. Lack of screening First, selling-away deals involve securities that are not screened by the brokerage firm. Brokerage firms screen the products they offer for a reason: to make sure that their customers have access to solid investments. Without these safeguards, investors are taking on significantly higher risk. Lack of disclosures Second, selling away deals rarely include the formal risk disclosures found with approved brokerage products. There is no review of the investment by the brokerage’s compliance department, and the exact nature of the risk involved may be unclear. Less accountability Finally, it may be harder to recover losses. When a broker engages in an approved transaction, the brokerage takes on liability for the broker’s activity. Because brokerages are often completely unaware of selling-away transactions, it is much harder to prove liability on the part of the brokerage. In the case of significant investor losses, this can mean less money recovered overall. Selling-Away FINRA Regulations There are two main FINRA regulations that cover selling away: Rule 3270 and Rule 3280.  FINRA Rule 3270 prohibits brokers from engaging in activities that are outside of the broker’s relationship with their brokerage firm unless written notice is provided to the firm.  FINRA Rule 3280 is similar, and prohibits brokers from engaging in private securities transactions (including selling away) without first providing written notice to their firm. After receiving that notice, the member firm may approve or disapprove the transaction. If the firm approves, then the firm supervises and records the transaction. Disapproval, on the other hand, prohibits the broker from participation in the transaction either directly or indirectly. What Are the Penalties for Selling Away? Both brokers and brokerage firms can be held liable when a broker sells away. FINRA regulations require brokers to offer securities products suitable for each of their client’s needs. Brokers must account for their clients’ objectives, level of investing sophistication, and risk tolerances. When a broker fails to fulfill this obligation, FINRA may sanction, suspend, or bar the broker from the financial industry. According to FINRA’s Sanctions Guidelines, Brokers who engage in selling away open themselves up to monetary sanctions between $2,500 and $77,000 for each rule violation. For serious violations, FINRA may suspend the broker for up to two years or permanently bar them from practicing as a broker. The severity of the penalty depends on several factors: Because selling away involves transactions outside of a broker’s relationship with their brokerage firm, holding the firm responsible for investor losses is more difficult. Nevertheless, a brokerage firm may still be liable for the conduct of its brokers under FINRA regulations. Brokerage firms have an obligation to supervise the brokers with which they are associated. Failure to do so may result in the firm’s liability to the investor. How Do I Recover Losses from Selling Away Deals? Investors can try to recover their losses through several formal and informal methods. Speaking with a selling away lawyer is the best way to determine which method is right for your situation. FINRA Arbitration Many brokerage firms require their customers to sign mandatory arbitration clauses. If this is the case, then the investor must use FINRA’s arbitration process rather than filing a lawsuit.  Arbitration starts when the investor files a claim. From there, the parties go through similar procedures to those in the regular court system. Each side will engage in discovery and present their case at a hearing before an arbitrator. The arbitrator is responsible for reviewing the evidence and ultimately issuing a decision and award. Contacting Your Brokerage Firm A brokerage firm’s compliance department may be interested in reaching a resolution without involving the courts. In some cases, investors recover losses from their broker’s selling away deals through mediation. FINRA provides access to informal mediation to facilitate a mutually acceptable agreement between...

Continue Reading

What is a Broker CRD Number?

CRD, or Central Registration Depository, is a comprehensive database maintained by FINRA of all registered securities professionals and firms, providing an invaluable resource for investors. Investors can use a CRD number to access information about any broker or investment advisor, including their employment history, qualifications, examinations taken and passed, licenses held, disciplinary actions and more. Brokers and brokerage firms must register with the Financial Industry Regulatory Authority (FINRA) before they can legally sell securities in the United States. By maintaining a registration system, FINRA can better monitor and record the activities of registered brokers. These registrations are also open to the public, so investors can review the backgrounds of potential brokers before entrusting them with their money. You can look up your broker and brokerage firm by using their unique CRD (Central Registration Depository) number. What Is a Broker CRD Number? CRD (Central Registration Depository) numbers are unique identification numbers assigned by FINRA to registered brokers and brokerage firms. You can use the CRD number to look up a broker or brokerage firm’s disciplinary history, qualifications and other detailed information. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. Central Registration Depository (CRD) & FINRA FINRA manages the Central Registration Depository (CRD) program. This program covers the licensing and registration of individuals and firms in the securities industry in the United States. When a broker or firm registers with FINRA, the regulator assigns them a CRD number. Investors can use a broker’s CRD number to check that broker’s work history and disciplinary record using BrokerCheck.  A broker’s profile on BrokerCheck will contain useful information for investors. On any given profile, investors can find information related to Complaints and regulatory actions are called “disclosures,” and investors can see details about each one using BrokerCheck. If the claim was settled, BrokerCheck displays the settlement along with the claimed allegations and the broker’s response, if any. Why It’s Important to Investigate a Potential Broker An investment broker is responsible for handling a significant portion of your assets. For that reason, you should learn as much about them as possible before giving them control. Doing your research before handing over your money can save you time and stress in the long run by helping you avoid unscrupulous brokers. If a broker’s disclosure history shows several complaints, each of which the broker denies, you can make the decision to move on or bring up your concerns. In any case, having more information about your broker’s past allows you to make a smarter decision about who is managing your money. How to Find a Broker’s CRD Number Before engaging a broker, you have the legal right to request their CRD number. If a broker refuses to provide this information to you, stop and find another broker to work with. Any broker unwilling to give you their CRD number likely has something to hide and is probably not someone with whom you want to invest. While asking your broker directly is the fastest way to get their CRD number, the information materials and agreement you receive before engaging your broker will likely contain this information as well. Regardless of how you obtain it, searching your broker’s CRD number is an important step when hiring a broker. How to Do a FINRA BrokerCheck CRD Number Search Finding information about a broker or firm in the past used to be a hassle. Fortunately, BrokerCheck makes it easy to research a broker with whom you want to invest. After visiting the BrokerCheck website, there are a few things you can do to check out a broker or firm. Search by CRD Number, Broker, or Firm Name Using the “Individual” or “Firm” search options, you can search for your broker by CRD number or name. Because many brokers may have the same or similar names, using a CRD number ensures that you find the right BrokerCheck report. You can also search for a specific brokerage firm using its CRD number or name. Doing so will return a report with much the same information as a broker search. Additionally, you can see a list of the direct owners and executive officers of the firm and information about when the firm was established. Examine Your Broker’s Employment History and Experience In the “Previous Registrations” section of the BrokerCheck report, you can see a chronological list of the firms with which the broker was previously registered. If you are concerned about gaps in employment or short tenures, you can discuss them with your broker. Check Your Broker’s Licenses and Exam History BrokerCheck also provides a comprehensive list of the examinations and licenses your broker has obtained. In addition to FINRA registration, your broker may have broker or financial adviser registrations in other states. The “Examinations” section shows you the date and type of exam your broker passed. If you are interested in a specific type of security or curious about the broker’s overall certification status, you can check that there. Read Through Any Disclosures BrokerCheck disclosures cover not only customer disputes and disciplinary actions but employment terminations, bankruptcy filings, and criminal and civil proceedings as well. If a broker was the subject of a court-ordered lien or other debt, it will show up with the other disclosures. This is the most important section to review while researching your broker. If there are no disclosures, then you’re good to go. If there are, however, then you should read through them carefully to decide whether to find another broker. Just because a customer dispute is filed does not mean that the broker engaged in wrongdoing. In many cases, the claim may not even reference the individual broker directly even if it shows up in the BrokerCheck report. Essentially, the existence of one or more disclosures does not automatically mean that the broker is bad. You should review and follow up on any disclosures you are concerned about. Do You Need a FINRA Attorney? If you’ve lost money and believe you are a victim of investment...

Continue Reading

What is Stockbroker Fraud?

Stockbroker fraud is, unfortunately, all too common. Investors typically understand that there is always some risk when investing in the stock market. However, what they don’t expect is for their broker to intentionally deceive them and engage in illegal activities to make a profit. Brokers are strictly regulated by the Financial Industry Regulatory Authority (FINRA) and must adhere to a fiduciary standard when providing advice to their clients. When a stockbroker fails to act in the most beneficial manner for their client, they may be participating in unlawful activity known as stockbroker fraud. What is Stockbroker Fraud? Stockbroker fraud is any act committed by a broker or financial advisor that violates the securities laws or their fiduciary duty to their client, generally in an effort to gain profits for themselves or their firm. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. There are many different ways a stockbroker may violate their legal and ethical obligations towards their clients. If a broker commits securities fraud, their employer – which is often a large brokerage firm – will be held accountable for any losses the client suffers. 12 Common Types of Stockbroker Fraud Below are the most common examples of stockbroker fraud and other stockbroker misconduct: Recommending Unsuitable Investments Brokers have an obligation to make sure that any investments they recommend are suitable for the investor’s individual needs and objectives. If a broker recommends a high-risk investment to someone who is looking for conservative, low-risk options, this could be seen as unsuitable advice. Unsuitable investments can lead to serious losses for the investor, so it is important that brokers provide advice tailored to their clients’ individual needs and goals. Outright Theft or Misappropriation of Funds This is one of the most serious forms of stockbroker fraud. It involves a broker taking money from their client’s account without authorization and using it for their own personal gain. This could include transferring funds to accounts they control or even selling securities in the client’s account and pocketing the proceeds. There are many different ways brokers can steal from their clients, so it’s important for investors to closely monitor their accounts. If you find unusually large transactions or other suspicious activity, you should contact a stockbroker fraud attorney. Churning (Excessive Trading) Churning occurs when a broker engages in excessive buying and selling of securities in a client’s account, often for the purpose of generating commissions. While some trading activity is expected with any investment strategy, churning can be seen as irresponsible behavior that only benefits the broker while putting the investor at risk. You can often spot churning by looking for unusually high commission charges or a large number of transactions with short holding periods. Unauthorized Trading on a Client’s Account Similar to churning, unauthorized trading occurs when a broker executes trades in a client’s account without their knowledge or authorization. This is an illegal activity that can be seen as a form of theft if the broker does not have the client’s permission to act on their behalf. Unauthorized trading can also be seen as a breach of fiduciary duty, since the broker should have obtained their client’s consent before entering into any transactions. Lack of Diversification Another form of stock broker fraud is a lack of diversification. This occurs when a broker invests all or most of the client’s money in one type of security, such as stocks, bonds, or mutual funds. Diversifying an investment portfolio can help reduce risk and maximize returns, so failing to diversify a client’s investments could be seen as a breach of fiduciary duty. Misrepresenting or Omitting Information It is the responsibility of a stockbroker to provide accurate and complete information about any investment they recommend. If they fail to do so, or intentionally misrepresent the facts, this could be seen as a form of stock broker fraud. Not only that, but they must also disclose any risks associated with the investments they recommend. Failing to do so could lead to serious losses for their clients. Failing to Follow Instructions In most cases, your broker is ethically and contractually compelled to follow your directions when you’re buying or selling stock. If you instruct your broker to make a certain trade, and they fail to do so, this could be seen as a breach of their duties. In some situations, the broker won’t flat-out ignore your instructions but might attempt to persuade you into keeping a stock that you wanted to sell, for their benefit rather than yours. Failure of a broker to follow your instructions, and even improper pressure to change your instructions, can be grounds for recovering your loss. Over-Concentration of Assets Over-concentration occurs when a broker invests too much of a client’s money in one particular security or sector. This is risky, as it could cause the investor to suffer significant losses if that security or sector declines in value. Imagine if your broker recommended investing all of your money in a structured product, and then the structured product suddenly declined. You could find yourself with a margin call or a forced liquidation of your portfolio. Failure to Disclose a Personal Interest in a Security Brokers owe their clients a duty of disclosure, meaning they must disclose any personal interest they have in security before recommending it. Imagine if your broker recommended that you invested in a certain stock only for you to later find out they had a majority ownership stake in the company. Of course, you would be upset. You have a legal right to expect your broker to put your interests first. Failing to disclose their personal stake in the security could be seen as a breach of fiduciary duty and constitute stock broker fraud. Negligent Portfolio Management A big reason you hired a broker in the first place was to get professional advice on how to manage your investments. If the broker fails to follow through on their duties and takes actions that are deemed negligent, this could be seen as a form of stockbroker fraud. When it...

Continue Reading

What is FINRA Rule 3210?

FINRA Rule 3210 is a newer FINRA rule, approved by the U.S. Securities and Exchange Commission (SEC) in the Spring of 2016 and rolled out the following year. The regulators’ goal in approving this rule was to prevent conflicts of interest by financial advisors and broker-dealers. To carry out this goal, the rule governs the ability of registered financial advisors to use investment accounts outside of the accounts offered by their FINRA member firm.  At the Law Offices of Robert Wayne Pearce, P.A., we are committed to helping you enhance your investor education and understand all the FINRA-registered broker-dealer rules that may impact your decision-making. What is FINRA Rule 3210? FINRA Rule 3210 requires all employees to notify their employers if they intend to open or maintain an investment account at a competing financial firm. Rule 3210 governs accounts opened by members at firms other than where they work. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. FINRA Rule 3210 also imposes conditions on accounts opened and maintained by associated persons of members, which include spouses, children, and other family members of the employee. IMPORTANT: Understanding rules like FINRA Rule 3210 can help you become a well-informed investor. It may also help you know what to look for when selecting a brokerage firm or a registered financial professional. FINRA Rule 3210 Broker Dealer Overview When an individual works for a brokerage firm, they typically keep their assets at that firm. The firm is therefore able to monitor their trades and can ensure that the financial advisor is not frontrunning their clients in a personal brokerage account. The firm can also monitor the financial advisor’s account for insider trading or other bad activity. But what happens when the financial advisor works for Bank A but wishes to keep their accounts at Bank B? Rule 3210 specifies that the financial advisor must receive written permission from Bank A to open the account at Bank B. Not only may the financial advisor not open the account without permission, but they must also declare any account in which they have a “beneficial interest.” This means that if their spouse has a brokerage account at Bank B, they must disclose that to their employer as well.  These FINRA-registered broker-dealer rules may seem challenging at first. However, they have been carefully implemented to protect investors from financial advisor conflicts of interest. Your Financial Advisor’s Requirements Under Rule 3210 Rule 3210 is not merely about allowing your financial advisor’s employer to see what is in their account. It is primarily about preventing conflicts of interest. In doing so, the rule requires: An important part of this rule is the written consent part. Everything must be in writing under Rule 3210. Indeed, keeping written records is a requirement under most FINRA-registered broker-dealer rules. Maintaining a record of requests and consents is important in this case because Rule 3210 pertains to conflicts of interest. FINRA does not have a set form for requests and consents under Rule 3210. Each firm creates its own FINRA Rule 3210 letters. The FINRA 3210 Letter Rule 3210 requires financial advisors to make a request and obtain consent from the FINRA member firm they work for to keep their accounts somewhere else. It also requires a disclosure letter to the outside firm when a securities industry professional opens an account. This disclosure action is sometimes referred to as a FINRA 3210 Letter. Making this disclosure is one important step in preventing conflicts of interest for either firm. Even more important than consent may be the fact that a financial advisor must submit duplicate brokerage statements to their employer. A financial professional may have their brokerage accounts at an outside firm. However, their employer must have transparency into their account activity just as if the accounts were in the employer’s custody. Rule 3210 is essential in balancing the right of financial professionals to use whichever brokers they choose with an employer’s need for compliance and a client’s need for transparency.  Close Family Members Must Also Comply with FINRA 3210 It may seem hard to believe that a FINRA broker dealer rule might apply to someone who doesn’t work in the financial services industry. But it’s true—FINRA 3210 requires disclosure of accounts from the following people related to a registered financial industry professional: In the event that both spouses work at FINRA member firms, then each spouse would have to comply with this rule. Both member firms would be notified about the other spouse’s accounts. Protecting Against Conflicts of Interest A primary goal of FINRA Rule 3210 is to prevent FINRA member conflicts of interest. Your financial advisor and your brokerage firm should be working for you, in your best interest. Where an undisclosed conflict is lurking, your broker simply cannot provide you with the advice or level of service you should expect.  An important part of investor education about FINRA broker dealer rules is to allow you to understand the issues behind rules like FINRA 3210. Being well-informed about what these rules are and how they work helps make you a savvy investor. You will be better equipped to ask questions about potential conflicts of interest. You will also know to ask about your brokerage firm’s compliance systems and record retention.  Related Read: What Constitutes a Breach of Fiduciary Duty? Concerned That a Conflict of Interest Has Led to Investment Loss? If you are concerned that a conflict of interest caused you investment loss, we are here to fight for your rights. When you engage an investment advisor or a brokerage firm, you expect the highest level of service. When these professionals fail to act in your best interest, they should be held accountable. Learn how you can file a formal FINRA complaint against your advisor. At The Law Offices of Robert Wayne Pearce, P.A., our practice focuses on all manner of investment-related litigation, FINRA arbitration, and dispute resolution. Our FINRA arbitration lawyers have the expertise and savvy to take on...

Continue Reading

Margin Calls: What Are They & How You Can Manage One

Increased volatility in the market can sometimes bring about uncomfortable and surprising situations for investors, especially when it comes to margin calls. You may find yourself asking when do margin calls happen and how do they work. When you buy stock on a margin, you’re essentially borrowing money from your broker to finance the purchase. While this is a strategy that can amplify your gains if the stock price goes up, it can also lead to painful losses if the stock price falls and you’re forced to sell other assets or put more money into your account to meet the margin call. In this article you will learn everything there is to know about margin calls, including: IMPORTANT: If you have suffered significant investment losses as a result of being forced to liquidate a margin account, you should speak to an experienced securities fraud attorney about your legal options. What is a Margin Call? A margin call is a demand from your broker that you must deposit more money or securities into your margin account to cover potential losses. This typically occurs when a margin account runs low on funds, usually due to heavy losses in investments. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. In most, but not all cases, your broker will notify you of a margin call and give you a set amount of time to deposit more funds or securities into your account. You typically will have two to five days to respond to a margin call. Timeframes for responding to a call may vary depending on your broker and the circumstances. Regardless of the time frame, it is important that you take action as soon as possible. IMPORTANT: If you aren’t able to meet the margin call fast enough or don’t have any extra funds to deposit, your broker may also force you to sell some of your securities at a loss in order to free up cash. This is known as forced liquidation. In fact, many margin account agreements allow brokerage firms to liquidate your portfolio at their discretion without notice. What Triggers a Margin Call? There are several things that can trigger a margin call, but the most common is when the value of securities in your account falls below a certain level set by your broker (house maintenance margin requirement) or securities exchange where securities are traded (exchange margin requirement). When this occurs, your broker will issue a margin call in order to protect themselves from losses and to ensure that your account has enough funds to cover potential losses. You’re then required to deposit additional funds or securities into your account to meet the call to bring your account back to the maintenance margin level. If you don’t make a deposit, your broker may sell some of your securities at a loss to cover the shortfall. Margin calls can occur at any time, but tend to occur during periods when there is high volatility in the markets. What happens when you get a margin call? A margin call is most often issued these days electronically, through your broker’s online platform. You can also receive an email or other notification from your broker informing you of the margin call and how much money you need to deposit by a certain time. What happens next depends on your broker and the situation. If your broker is not worried about the situation, they may give you some time to raise the extra funds to deposit into your account. If they are worried, they may demand that you meet the call immediately or they may even sell some of your securities to cover the shortfall if you don’t have the extra cash on hand without notice. Yes, a broker can sell your securities without your permission if you don’t have enough money in your account to meet a margin call. All of this depends upon the contract you signed when you opened your account which outlines the broker’s rights in these situations. It’s important to remember that your broker will most likely be interested in protecting their own financial interests rather than yours, so you should make sure that you understand your rights and obligations before entering into a margin agreement. Because they are not always required to give you time to meet a margin call, unless they are under contractual agreement to do so, they may not notify you before liquidating assets in your account to pay off any margin debt. If this happens, your investment portfolio may suffer significant losses. Unfortunately, even if you are in a position to meet the call, you may not be able to get your securities back if they have already been sold by your broker. When you opened up your margin account, you likely signed an agreement that gave your broker the right to sell your securities without notifying you first. This is why it’s important to understand the terms of your margin agreement before signing it. You should also be aware of the risks involved in trading on margin. MPORTANT: If your broker decides to sell your highly appreciated securities, you can be left with large deferred-tax liabilities as well as major capital gain tax expenses that must be paid in the relevant tax year. In addition, brokers can sell your securities within the margin account at an undervalued price, leaving you with even more investment losses. How long do you have to pay a margin call? The time frame for responding to a margin call can vary depending on your broker and the circumstances. Typically, brokers will allow from two to five days to meet the call. You will need to review your account agreement with your broker to be sure. Beware, most margin account agreements do not require the broker to give you any amount of time or notice before they liquidate. What happens if you cannot pay the margin call? Not meeting a margin call can have long-term consequences...

Continue Reading

What is Securities Fraud? Definition, Examples, & How to Report

If you’ve been the victim of securities fraud, you may be able to take legal action. What is Securities Fraud? Securities fraud, also known as investment fraud or stock fraud, involves using false or misleading information to convince investors to make investment decisions that result in substantial losses. All forms of securities fraud aim to deceive investors into taking actions that benefit the perpetrator financially. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. Almost anyone can be a victim of securities fraud. While the elderly and inexperienced investors are frequent targets, even savvy investors can fall prey to securities fraud if they’re not careful. Perpetrators of securities fraud will often make false or misleading statements in order to persuade investors to buy or sell securities, usually at the benefit of the perpetrator. If you believe you have been a victim of securities fraud, it is important to take action. Securities fraud is an illegal or unethical activity punishable by law. You may be able to recover your losses by filing a lawsuit against the person or entity who committed the fraud, as well as protect yourself and other investors from future harm. You should consider talking with an investment fraud lawyer to learn more about your legal options. Key Takeaways Securities Fraud is an illegal and deceptive practice targeting investors to make investment decisions based on false or misleading information. There are many different perpetrators of securities fraud, and almost anyone can be a victim. Commons forms of securities fraud include but are not limited to: High Yield Investment Frauds, Ponzi & Pyramid Schemes, Advance Fee Schemes, Misconduct by an Investment Advisor, and Structured Notes. There are legal actions you can take if you have been the victim of securities fraud, especially if you’ve suffered substantial investment losses as a result. The Different Perpetrators of Securities Fraud There are many different perpetrators of securities fraud, and they all have different motivations. Some may be driven by greed, while others may simply be trying to take advantage of investors. Regardless of their motivations, all perpetrators of securities fraud share one goal: to make money by deception. Securities fraud can be committed by a single person, such as a stockbroker or a financial advisor. It might also be perpetrated by an organization, such as a brokerage firm, corporation, or investment bank. In these scenarios, the target is usually an unsophisticated investor who is unaware of the fraud being committed. Independent individuals may also commit securities fraud, such as insider trading or market manipulation. In these cases, the individual investor is usually the perpetrator rather than the victim. Due to the actions of the independent individual, the entire market may be impacted, and other investors may suffer losses as a result. Unfortunately, the perpetrator of securities fraud may be unknown. This is often the case with internet fraud, where scammers set up fake websites or send out mass emails to trick investors into giving them money. Anyone can be a perpetrator of securities fraud, and anyone can be a victim. The best way to protect yourself is to be aware of the different types of securities fraud and to know what red flags to look for. What are Common Examples of Securities Fraud? There are many different types of securities fraud, but some are more common than others. When a broker or investment firm takes your money with the promise of investing it and then uses it for other things, you’ve been a victim of securities fraud. Securities fraud schemes are often characterized by offers of guaranteed returns and low- to no-risk investments. The most typical forms of securities fraud, as defined by the FBI, are: High-Yield Investment Frauds These types of securities fraud are often characterized by promises of high returns on investment with little to no risk. They may involve a few different forms of investments, such as securities, commodities, real estate, or other highly-valuable investments. You can identify these schemes due to their “Too good to be true” offers. These types of fraud tend to be unsolicited. Perpetrators may elicit investments from investors by internet postings, emails, social media, job boards, or even personal contact. They may also use mass marketing techniques to reach a large number of potential investors at once. Once the fraudster has received the investment money, they may simply disappear with it or use it to fund their own lifestyle. The investment itself may not even exist. Ponzi & Pyramid Schemes These types of securities fraud use the money collected from new investors to pay the high rates of return that were promised to earlier investors in the scheme. Payouts over time give the early impression that the scheme is a legitimate investment. However, eventually, there are not enough new investors to support the payouts, and the entire scheme collapses. When this happens, the people who invested at the beginning of the scheme often lose all of their money. In these schemes, the investors were the only source of funding. Advance Fee Schemes In these types of securities fraud, the investor is promised a large sum of money if they pay an upfront fee. The fees may be called “commissions”, “processing fees”, or something similar. The fraudulent organization will often require that the fee be paid in cash, wire transfer, or even cryptocurrency. They may also ask the investor to provide personal information such as bank account numbers or social security numbers. Once the fee is paid, the fraudulent organization will often disappear and the investor will never receive the promised money. Other Securities Fraud In addition to the above list provided by the FBI, at The Law Offices of Robert Wayne Pearce, P.A., we have found that the following types of securities fraud are also common: Misconduct by an Investment Advisor By far the most common type of securities fraud that our firm sees is misconduct by an investment advisor or brokers. Investment advisors or brokers are supposed to act in their clients’ best interests (fiduciary duty), but some advisors put their own...

Continue Reading

Everything You Need to Know about an SEC Wells Notice

If you’ve received a Wells Notice from the SEC, it’s important to understand what it is and how to respond. What is a Wells Notice? A Wells Notice is usually a formal letter (sometimes just a telephone call) in which the staff enforcement attorneys of the U.S. Securities and Exchange Commission (SEC) notify individuals and/or firms that they are planning to recommend that the SEC authorize the attorneys to bring an enforcement action against the individual and/or the firm.  Investment Losses? Let’s talk. or, give us a ring at 800-732-2889. A Wells Notice will typically set forth the specific allegations against the individual and/or firm, as well as provide an opportunity for a response before the SEC makes a final decision on whether to bring charges. After an SEC investigation has turned up evidence of potential securities law infractions, the staff enforcement attorneys will usually provide a Wells Notice but, not always! Note: If you have received a Wells Notice, it means the SEC enforcement attorneys believe you have been violating securities laws and regulations, it is not a finding of guilt. It is important that you act quickly and consult with an experienced securities defense attorney to protect your rights and interests. What information is contained in a Wells Notice? A Wells Notice from the SEC will usually contain the following information: The majority of what appears in a written Wells notice is boilerplate. Typically, the written notice details statutory and regulatory infractions under consideration but does not allude to the specifics of the specific case. Are public companies required to disclose a Wells Notice? A Wells notice is a private communication to the recipient, and the Commission will not disclose it. In the past, many companies elected to not make any public disclosure of a Wells Notice. However, in recent years, some companies have voluntarily disclosed the receipt of a Wells Notice in their public filings with the SEC. Generally, such disclosures are a discretionary choice, rather than a requirement. The decision turns on whether the investigation and potential consequences would be a material fact that needs to be disclosed in light of other statements being publicly made by the company. Are registered broker-dealers and investment advisors required to disclose a Wells Notice? Yes, if you are a registered broker-dealer or investment advisor, you will be required to disclose the receipt of a Wells Notice in your Form U4. Related Reads: SEC Subpoenas: How to Respond How to Respond to a Wells Notice If you’ve received a Wells Notice, the first thing you should do is consult with an experienced securities defense attorney. Your attorney will help you understand the specific allegations against you and decide whether you should respond at all. If so, the attorney will craft a strategic and customized response on your behalf. Your response to a Wells Notice (also known as a Wells Submission) will be incredibly important in determining whether or not the SEC takes enforcement action against you. In some cases, a well-crafted response may convince the SEC to drop the matter entirely. In other cases, it may result in a more lenient punishment if the SEC does decide to bring charges. Before responding to a Wells Notice, you and your attorney will need to carefully review all of the evidence collected during the SEC’s investigation. This may include: Once the analysis of the evidence is complete, your attorney will work with you to prepare a persuasive response that addresses the SEC’s specific concerns. This is a very important step as a Wells Submission presents the facts and the first arguments to persuade the SEC Enforcement Division to not pursue an enforcement action or to recommend a less severe action. The SEC will review the response and make a final determination on whether or not to bring charges. Even though the Wells Notice process is confidential, it may become public if the SEC decides to bring an enforcement action against you. More important, whatever is written in the response to the Wells notice could be deemed an admission of the facts stated within the Wells Notice. What Happens if the SEC decides to bring Charges? If the SEC decides to bring charges after you’ve received a Wells Notice, it will file a formal complaint against you in federal court or administrative proceeding. At this point, you will have an opportunity to defend yourself against the SEC’s charges. This is a complex process, and you will need to have an experienced securities defense attorney by your side to protect your rights and help you navigate the legal system. A Wells Notice is just the beginning of the SEC’s enforcement process, but it’s a very important step. If you’ve received a Wells Notice, make sure you consult with an experienced SEC defense attorney as soon as possible to ensure the best possible outcome in your case. Consider Consulting with an Experienced SEC Defense Attorney If you’ve received a Wells Notice, you should consult with an experienced securities defense attorney as soon as possible. The Law Firm of Robert Wayne Pearce, P.A., has represented individuals and entities in SEC investigations and enforcement actions for over 40 years. For dedicated representation by attorneys with substantial experience in all aspects of SEC investigations and enforcement proceedings nationwide, contact our law firm by phone toll-free at 800-732-2889, locally at 561-338-0037, or Contact Us online. We will help you understand the specific allegations against you and will work with you to prepare a persuasive response to the SEC.

Continue Reading