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Pearce Law Firm Client Wins $2.55 Million Against Investment Advisor

This was a sad case of financial abuse by an ex-spouse of another taken to arbitration by Robert Pearce and Adam Kara of The Law Offices of Robert Wayne Pearce, P.A.  (the “Pearce Law Firm”) for one of its clients. The Pearce Law Firm represented Elizabeth Snyder who filed claims against her ex-husband, Barry Snyder, for allegedly mismanaging her investment accounts through highly speculative, excessive and unsuitable trading strategy when he was employed as her stockbroker and later when he acted as her investment adviser at Glenwick Capital Holdings, LLC. In the Spring of 2015, in breach of his fiduciary duties as an investment adviser, Mr. Snyder allegedly misrepresented that Mrs. Snyder needed to transfer almost all of the Snyder Trust to a new investment vehicle, Linkster Holdings, LLC, for estate planning purposes when Mr. Snyder was about to be fired and become unemployable in the securities industry and setting up a “family office” to avoid registration with the regulators.  No one told Mrs. Snyder that he was fired and under investigation for misconduct even though he still continued to manage her accounts with the assistance of other employees at his former employer’s brokerage firm. Shortly after being terminated at that brokerage firm, Mr. Snyder caused Claimants’ accounts to be transferred to Montecito Advisors, Inc. and another brokerage firm where he allegedly crushed Mrs. Snyder financially through the same highly speculative, excessive and unsuitable at those brokerages.  Within a few short months, Mrs. Snyder’s life savings were wiped out. Mrs. Snyder alleged that Mr. Snyder’s actions were in contravention of his “fiduciary duty”  to act in his investment advisory clients’ “best interest” and industry standards of conduct such as FINRA Rules of Conduct 2110, 2111 (f/k/a 2310), and 2120, which state: 2110. Standards of Commercial Honor and Principles of Trade A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade. 2111. Suitability (a) A member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile.  A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.                                  * * * 2120.      Use of Manipulative, Deceptive or Other Fraudulent Devices No member shall effect any transaction in, or induce the purchase or sale of, any security by means of any manipulative, deceptive or other fraudulent device or contrivance.                                  * * * Mr. Snyder’s recommendations and trading in Mrs. Snyder’s accounts were allegedly breaches of FINRA’s suitability rule, which has long been applied to recommended “investments” and “investment strategies.”  Mr. Snyder allegedly misrepresented the “investments” and “investment strategies” to Mrs. Snyder as safe and suitable.  The over-concentration, over-leverage, and excessive risks taken in the accounts were allegedly not fully disclosed to Mrs. Snyder until it was too late. Mr. Snyder’s acts and omissions not only allegedly violated his fiduciary duties, the FINRA standards of commercial honor and principles of trade, but also included the alleged use of manipulative, deceptive, and fraudulent devices and other FINRA Conduct Rule violations. As we indicated above, Mr. Snyder lost every dollar in Mrs. Snyder’s accounts.  She was forced to sell her home, jewelry, etc. to support herself and children after the suffering the investment losses. No law firm other than the Pearce Law Firm was willing to take the case on a contingency fee basis, and we did so, successfully! The Pearce Law Firm sought an award of over $ 4,093,067 in market adjusted compensatory damages, or alternatively, $3,495,883 in net-out-of-pocket compensatory damages plus pre-judgment interest, attorney fees, expert witness fees, and costs. The arbitration award indicates the Panel was apprised of the amounts of settlements with other Respondents and requested to deduct those amounts from the compensatory damages before the award was entered. The Panel then entered an Award of $2,554,896 in compensatory damages but denied Claimants request for prejudgment interest, attorney fees, expenses, etc. Free Initial Consultation With Securities, Commodities and Investment Dispute Lawyers Serving Investors Nationwide If you have had your accounts mismanaged by Barry Snyder or any other stockbroker, investment adviser and/or trustee, and heard similar misrepresentations, received unsuitable recommendations, please call our office. The Law Offices of Robert Wayne Pearce, P.A. understands what is at stake in securities and commodities law matters and investment disputes, and works tirelessly to secure the best possible result for you and your case.  Mr. Pearce provides a complete case review, identifies the strengths and weaknesses of your case, and fully explains all of your legal options.  The entire law firm works to ensure that you completely understand the ins and outs of the legal process to give you complete peace of mind knowing that you have chosen the best possible representation for your case.

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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.

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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.”

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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.

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How to File a Complaint Against Your Financial Advisor

When you hire a financial advisor, you expect the advisor to act in your best interest to prevent unnecessary losses. Unfortunately, however, financial advisors do not always live up to these expectations. In some cases, a financial advisor fails to follow an investor’s requests and guidelines or otherwise engages in misconduct, causing the investor to suffer losses. When this happens, the investor may be able to file an official complaint against the financial advisor through the Financial Industry Regulatory Authority (FINRA). In this article you will learn how to file a complaint against a financial advisor to recover your losses.

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FINRA Rule 3210 Overview

FINRA Rule 3210 is a newer FINRA rule, approved by the U.S. Securities and Exchange Commission (SEC) in the Spring of 2016. 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.  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.  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. 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. 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: Obtaining prior written consent for opening accounts outside of the employer firm; Giving written notification of the financial advisor’s employment at his or her brokerage firm to the brokerage firm opening the new account; and Submitting written copies of brokerage statements or transaction data to the employer firm upon request. 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 their own FINRA Rule 3210 letters. 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: A spouse; A financially dependent child of the registered financial industry professional or a child of the registered financial industry professional’s spouse;  A relative over whose accounts the registered financial industry professional has control; and Any other person over whose accounts the registered financial industry professional exercises control and who they materially financially support.  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.  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. At The Law Offices of Robert Wayne Pearce, P.A., our practice focuses on all manner of investment-related litigation, arbitration, and dispute resolution. Our team has the expertise and savvy to take on even the most complex disputes. Contact our...

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FINRA Rule 2165: Financial Exploitation of Specified Adults

Are you curious about how FINRA Rule 2165 can protect you or a loved one who is being financially exploited? FINRA Rule 2165 helps families and brokers who suspect securities fraud in a vulnerable adult’s account. It allows them to take key actions against investment loss.  While their broker may be trustworthy, your parents or other elderly loved ones may reach a point where they are no longer able to make sound investment decisions. A common example of this is when a parent becomes involved in a Ponzi scheme. Another often-seen scenario is when a parent is defrauded into allowing a nefarious third party access to their accounts. Their accounts are quickly drained before an eagle-eyed broker or a caring son or daughter suspects investment fraud. FINRA Rule 2165 is designed with folks like senior citizens in mind. The rule helps a broker look out for their vulnerable clients’ interests. It also enables them to do so before losses become catastrophic.  FINRA Rule 2165: Financial Exploitation Defined FINRA Rule 2165 defines “financial exploitation” as consisting of either of two circumstances. First, Rule 2165 identifies financial exploitation as the wrongful or unauthorized taking or use of a specified adult’s funds or securities. This first definition is very broad and can encompass many types of financial exploitation. Second, Rule 2165 defines financial exploitation as any action or omission, including through a power of attorney or a guardianship, to do any of the following things:  Obtain control over a specified adult’s money, assets, or property through deception, intimidation, or undue influence; or  Steal the specified adult’s money, assets, or property.  FINRA Rule 2165 only protects “specified adults.” These are vulnerable people who may not be able to make their own financial decisions. FINRA Rule 2165 defines a “specified adult” as: A person age 65 or older; or A person age 18 or older who has a mental or physical impairment that impacts their ability to look after their own interests. The financial exploitation definition under FINRA Rule 2165 relates only to actions taken against specified adults. If you do not fit into the category of “specified adult,” you still may have been the victim of securities fraud. If so, it’s important to reach out to an experienced securities fraud attorney as soon as possible.  How FINRA Rule 2165 Protects Vulnerable Adults from Financial Exploitation FINRA Rule 2165 and its sister rule, FINRA Rule 4512, protect vulnerable adults from financial exploitation. These rules work together to allow a vulnerable person’s broker to freeze disbursement of funds from an account suspected of financial exploitation. They also allow a broker to notify a vulnerable person’s important contacts when the broker suspects financial exploitation is taking place. Preventing the Disbursement of Funds When Financial Exploitation Is Suspected A broker is able to place a temporary hold on a disbursement of funds or securities from a specified adult’s brokerage account if/when: A broker has a reasonable belief that financial exploitation has been or will be attempted, has occurred or is occurring; A broker notifies all parties authorized to transact in the account, as well as the account’s trusted contacts, about the temporary hold and the reason for it; and A broker initiates an internal review of why they believe financial exploitation was taking place. The notification to authorized persons on the account can be made orally or in writing (electronic communication is okay) within two business days. Brokers must communicate clearly and quickly about the temporary hold and the reason for the temporary hold. When working with specified adults, a broker needs to maintain a list of trusted contacts. A trusted contact person does not have to be a signatory on the account but can be anyone the broker can share important account information with.  Notification is a very important element of Rule 2165 because placing a hold on client funds is no small matter. However, if the broker suspects that the trusted contact is the person perpetrating the fraud, the broker is no longer under an obligation to notify them.  Rule 2165 Amends Other Protections Against Exploitation The SEC adopted FINRA Rule 2165 in February 2018, which amended FINRA Rule 4512. Previously, Rule 4512 only required brokers to collect and maintain basic personal data about their clients. Now, brokers are required to make reasonable efforts to obtain and maintain the name of a trusted contact person as well.  This revised rule is a great resource for investors and brokers alike. As the investor population ages, trusted contacts can be an excellent resource for brokers to share concerns about unusual client behavior or diminished capacity to make investment decisions. Early communication can lead to better results for investors, caregivers, and brokers. It can even prevent financial exploitation in the first place. Brokers Are Responsible for Compliance  Brokers now must make decisions about whether their clients have the ability to make financial decisions for themselves. This can be difficult and even embarrassing where brokers and clients have worked together for many years. Cognitive abilities of aging people and people with disabilities can change dramatically in short periods of time. Determining if and when a client is at risk of financial exploitation is a very delicate task. The responsibility falls on brokers to understand when transactions are legitimate or not.  Contact a Securities Fraud Attorney If you or a loved one has been financially exploited, you may have a legal right to pursue action against responsible parties. Experience is key in litigating cases like these. We at The Law Offices of Robert Wayne Pearce, P.A., are eager to help you understand your rights. Robert Pearce has many years of experience in the area of securities fraud. He has arbitrated and mediated hundreds of investment-related disputes in his career. Our team of experienced investment loss litigators has recovered over $140 million dollars for well-qualified investors. We help investors nationwide and internationally pursue claims for a variety of investment losses and frauds. Contact us today about a free initial consultation on your...

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How to Report a Ponzi Scheme

Ponzi-like schemes swindle investors out of millions of dollars every year. A common form of investment fraud, a Ponzi scheme occurs when existing investors receive distributions from funds provided by new investors rather than as a result of profits. Because Ponzi schemes can only function as long as new investors are providing funds, the schemes eventually collapse, resulting in significant losses for new and old investors. While Ponzi schemes are illegal, they nevertheless continue to exist. In fact, some sources have noted that in 2020 Ponzi schemes hit their highest levels in a decade.  If you are a victim of a Ponzi scheme, you may be wondering what recourse you have. Fortunately, there are actions you can take. By reporting a Ponzi scheme, you can help hold these fraudsters accountable and prevent other victims from being taken advantage of as well.  Don’t know where to begin? Contact attorney Robert Wayne Pearce today to learn more about how to report a Ponzi scheme and see what our team can do to help.  What Is a Ponzi Scheme? Financial advisors recommend investment strategies to investors based on their investment profile. In many situations, investors seek investments likely to result in returns based on the profitability of the investment. In a Ponzi scheme, investors do receive “returns.” However, these returns are not from the profits of their investment. Rather, the operator of the Ponzi scheme will issue payments to earlier investors from the new investment funds provided by newer investors. Inevitably, Ponzi schemes will run out of new investors who are willing to invest in the scheme. This results in the inability to issue the fraudulent returns to older investors and causes the entire scheme to crumble. In an ideal world, these types of fraudulent schemes would not exist. Unfortunately, however, there is always some risk that you could fall victim to a Ponzi or Ponzi-like scheme. What’s important is that you know where to turn and what steps you can take moving forward.  If you suspect you invested in a Ponzi scheme, consult with an investment lawyer who can explain the steps you should take next. With over 40 years representing investors, attorney Robert Pearce has the knowledge and experience you need to help you fight for your rights and recovery.  Examples of SEC Enforcement Actions Against Ponzi Schemes In April 2021, the SEC charged Los Angeles-based actor Zachary Horwitz and his company, 1inMM Capital, LLC, in connection with a Ponzi scheme that reportedly raised over $690 million from investors.  Horwitz and his company represented to investors that the investment funds would be used to purchase film rights and that the films would then be sold to Netflix or HBO. Horwitz allegedly claimed to have an extensive track record of selling movie rights to Netflix and HBO, despite the fact that he never maintained a business relationship with either company.  1inMM and Horowitz reportedly promised investors returns in excess of 35%. Instead, Horwitz paid early investors with the funds provided by new investors and misappropriated millions of dollars for himself. In January 2020, the SEC charged California-based husband and wife Jeffrey and Paulette Carpoff with orchestrating a nearly billion-dollar Ponzi scheme involving alternative energy tax credits.  The pair reportedly raised approximately $910 million from 17 investors between 2011 and 2018 by offering securities in the form of investment contracts through two solar generator companies, DC Solar Solutions, Inc., and DC Solar Distributions, Inc. The SEC alleged that the couple used at least $140 million of the investors’ funds to fund their lifestyle and used the remaining funds to issue dividends to earlier investors. If you have fallen victim to a Ponzi scheme, know that you are not alone. Reach out to our investment loss attorneys today to get started on the pathway toward recovery.  Indicators of a Ponzi Scheme Ponzi schemes come in many different shapes and sizes. However, there are certain common indicators of a Ponzi scheme that you should be aware of.  Many red flags associated with Ponzi schemes present themselves prior to and during the investment process. Recognition of these characteristics before making your investment can prevent you from suffering serious losses down the road. Common indicators of a Ponzi scheme include: Promises of high returns with little or no risk; Returns that are overly consistent; The sale of unregistered investments; A lack of transparency regarding the investment strategy; Errors or discrepancies on account statements; and Difficulty receiving or cashing out your payments. The presence of red flags such as these may signal the existence of illegal activity. If you experience any of these issues with your investments, a securities lawyer can help you determine if you invested in a Ponzi scheme.  Reporting a Ponzi Scheme Ponzi schemes can cost investors millions of dollars in losses. In an attempt to curb the operation of the fraudulent schemes, the SEC and FBI provide resources for individuals who suspect Ponzi schemes to report the misconduct. Federal Bureau of Investigation (FBI) The FBI provides an electronic tip form to individuals wishing to report federal law violations. Additionally, for internet-based crimes, the FBI offers another way to submit a tip. Because many Ponzi schemes begin and operate online, this might be the best place to report a Ponzi scheme. Securities and Exchange Commission (SEC) The SEC also provides defrauded investors an avenue to report suspected Ponzi schemes and other fraudulent activities. SEC Ponzi scheme tips can be submitted online directly through the SEC website.  Contact an Investment Loss Attorney Today Losing your valuable and hard-earned money in a fraudulent Ponzi scheme is never easy. If this has happened to you, we want to help. At the Law Offices of Robert Wayne Pearce, P.A., we have decades of experience helping investment loss victims in need. Firm founder and lead attorney Robert Pearce has recovered funds for over 99% of his investor clients and recovered over $100 million in the last 20 years alone through court litigation, arbitration, and settlements.  Want to know more about...

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Tips for Hiring the Best Structured Product Investment Lawyer

Investment vehicles come in a variety of forms, each with their own benefits and risks. Structured products are one such vehicle. These products can offer a compelling return, but at the cost of increased risk and complexity. If you lost money on a structured product investment, you may be able to file a claim to recover losses with the help of an investment lawyer. What Is a Structured Product? In short, a structured product is a type of security derived from or based on one or more other securities. The defining feature of a structured product, however, is that its return is based on the performance of the underlying asset. Structured products offer a great deal of customization that allows brokers to tailor the risk profile to each individual investor. At the same time, however, they are complicated securities with a level of risk that make them inappropriate for many investors. This complexity makes it more important than ever to make sure you have the best investment lawyer if you lose money on one of these products. Tip #1: Make Sure They Are Familiar with Structured Product Investments As explained above, structured product investments are fairly complex. Your investment lawyer needs to understand that complexity to properly represent you. Even if most investment lawyers are generally familiar with different investment products, a structured product investment lawyer will have additional experience working on cases involving these securities. Tip #2: Make Sure They Understand the Specific Risks of Structured Product Investments As an investor, you’ve no doubt been told many times about the risks involved with particular investments. Your investment lawyer should have the same understanding of those risks. Not only will this allow the lawyer to better understand your particular situation, it also means they will be more familiar with the ways in which a broker may cause you to lose money. For example, making sure your investments are suitable for you is a large part of a broker’s responsibility. Considerations as to the suitability of a structured product generally include: The volatility of the underlying asset; Tax implications based on structured products being considered “contingent payment debt instruments” by the IRS; Limits or caps on the product’s pay-outs; Accurately assessing the price of the product; Lack of an established trading market for structured products; and Loss of principal. Because structured products are so customizable, the specific risks associated with a specific structured product investment may vary. Tip #3: Ask About Their Experience with FINRA Arbitration and Mediation Many brokerage firms require investors to agree to arbitration when they open a brokerage account. While similar to court proceedings, arbitration is somewhat different and requires its own set of skills. At our firm, for example, Robert Wayne Pearce has handled arbitration and mediation before many regulatory authorities, including the Securities and Exchange Commission. In summary, the best investment lawyers will be those with experience in the specific types of proceedings relevant to your case. Tip #4: Ask Them About Their Familiarity with FINRA Rules and Broker Responsibilities The Financial Industry Regulatory Authority (FINRA), administers the set of rules that bind brokers and protect investors. Understanding these rules is just as important for investment lawyers as for brokers. Only with a deep understanding of the FINRA rules can a lawyer provide the most thorough representation to protect your rights. For example, FINRA rules prohibit brokers from “selling away,” a term for selling securities not offered by their brokerage firm. Unfortunately, brokers sometimes offer unapproved securities to their clients. With structured products, the risk can be especially high. Additionally, keep in mind that not all broker violations are obvious. Every investor’s situation is slightly different, and the way in which a broker might harm an investor is highly dependent on the facts of each case. Accordingly, you can’t go wrong by having a lawyer with experience who has handled structured investment loss claims before. Tip #4: Assess Whether You Get Along with Them An often-overlooked part of hiring legal counsel is whether you actually like your lawyer. While there’s nothing wrong with hiring an attorney based on their pedigree, it’s important not to forget that your attorney should also be someone you can work with. As with any other professional service, you shouldn’t have to put up with an attorney you dislike, especially if your case will last a long time. When you’re looking for an investment lawyer, figure out what kind of lawyer you’d like: do you prefer someone who doesn’t bother you unless there’s a major development, or would you rather be kept in the loop with more frequent updates? Do you value a friendly “bedside manner,” or are you ok with stricter professionalism? Tip #5: Ask Them About Previous Experience Handling Similar Cases Structured investment product claims may involve unique or complex issues. An attorney with previous experience handling such claims will be much better equipped to help you recover losses if possible. Tip #6: Find Out Their Track Record of Obtaining Settlements Investment lawyers typically include information about their past settlement awards directly on their website. If they don’t, it’s something you can ask about during your initial consultation. The best structured product investment lawyer will be one with a proven track record of winning cases for clients. Tip #7: Confirm Their Reputation Within the Legal Community As members of a profession with a high ethical standard, a lawyer’s reputation is hugely important. Whatever the size of the firm, it can be useful to vet their reputation like you would with another personal service. State and local bar associations and personal recommendations are a good way to evaluate any attorney. You can also check resources like the Martindale-Hubbell peer rating program, which ranks attorneys based on peer ratings and client reviews. Ready to Hire an Investment Lawyer? The Law Offices of Robert Wayne Pearce, P.A. is a Martindale-Hubbell AV Preeminent rated firm with more than 40 years of experience representing investors and brokers. If you lost money through a structured...

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FINRA Rule 3270: Outside Business Activities

When you engage a registered investment adviser to manage your money, you want to make sure that nothing will interfere with your securities professional’s duty to you. FINRA Rule 3270 gives transparency to potential conflicts of interest your investment adviser may have.  FINRA Rule 3270 requires your investment advisor to disclose their outside business activities. The purpose of FINRA 3270 is to keep FINRA member firms accountable to you, the client. If you are concerned that your securities professional might have violated certain disclosure rules, a knowledgeable investment loss lawyer can help you understand your options. FINRA Rule 3270 Requires Disclosure of Outside Business Activities In plain English, FINRA Rule 3270 means that your investment adviser may not engage in any outside business activities unless they have provided proper disclosure to their employer. FINRA rules about outside business activities are an important tool to protect investors. These help you to understand whether your investment adviser is putting your interests first. What Is a FINRA Outside Business Activity? FINRA outside business activities are broadly defined. FINRA Rule 3270 states that they include any paid work performed outside of a securities professional’s employment. This includes: Working as an employee for another company; Working as an independent contractor for another company; Serving as an officer, director, or partner of any outside board or organization; Receiving payment for any outside services; and Having the reasonable expectation of being paid for any outside business activities. This rule only requires an investment advisor to notify his or her employer of FINRA outside business activities. It does not require the investment advisor to do anything beyond provide a notification. Instead, the FINRA member firm makes a determination about what outside business activities are acceptable to the firm and its clients. The firm decides how or if outside business activities should continue to be carried out. Common Examples of FINRA Outside Business Activities Common examples of outside business activities include: Acting as both a financial advisor and a certified public accountant; Sitting on the board of directors of an outside organization, whether or not this activity is paid work; and Advising a start-up company for free but expecting future compensation once the company begins to turn a profit. Your investment advisor needs to report any of these activities to their employer under FINRA 3270.  The examples above are not exhaustive. An investment adviser also needs to report their wedding photography business or snorkel tour side-gig to their employer under the rules. FINRA rules about outside business activities apply to any paid work. Passive Investments Are Not Outside Business Activities While FINRA Rule 3270 casts a wide net, it allows investment advisers to make passive personal investments. Investing in diversified index funds or private securities transactions is not an outside business activity. Investment advisers may also put their personal funds into a blind trust. Blind trusts do not allow people to direct how their money is invested. Other FINRA rules require some disclosure about personal investments to ensure that your broker is being as transparent as possible about their potential conflicts of interest. FINRA Rule 3280 requires disclosure of private securities transactions. Your securities professional must strictly comply with this rule and its requirements. Your brokerage firm should ensure the investment adviser’s compliance with FINRA Rule 3280.  Responsibility of Brokerage Firms to Clients Once an investment adviser makes an outside business activities disclosure, the FINRA member firm must take important action. Each firm typically has its own form for reporting and its own protocol for review.  How Do Firms Determine Whether an Outside Business Activity Is Acceptable? Once a firm receives a disclosure, it needs to decide whether the outside business activities are acceptable. The FINRA member firm reviews all facts surrounding the disclosure. Then the firm answers two key questions to protect investors like you. First, Rule 3270 asks a FINRA member firm to consider all the circumstances surrounding the outside business activities. The review includes assessing the type of outside business, reviewing the time spent on the business, and confirming the type or amount of compensation received. The firm must decide whether outside business activities will interfere with the securities professional’s responsibilities to their employer and/or the firm’s clients. Second, Rule 3270 asks a FINRA member firm to think about whether outside business activities will be viewed by customers or the public as part of the member’s business. This review assesses whether a client would confuse the investment adviser’s outside business activities with their securities business.  How Do Firms Address Outside Business Activities That Conflict with an Advisor’s Duties? If the firm determines that the investment adviser’s outside business activities interfere with their responsibilities to the firm or its clients, then the firm should limit or prohibit the activity. FINRA Rule 3270 also requires firms to maintain a record of compliance. It is the firm’s responsibility to keep records of all outside business activities disclosures and compliance reviews. Brokerage firms are responsible to their clients to ensure that they are providing appropriate and conflict-free service in managing client assets. FINRA member firms must represent that their investment advisers are not engaging in outside business activities that compromise client interests. If you believe that your brokerage firm has failed to hold investment advisers accountable to FINRA Rule 3270 or otherwise adhere to conflict of interest rules, the firm may be liable for investor losses.  Have You Been Harmed by Your Investment Adviser’s Outside Business Activities? If you are an investor with concerns that your investment professional has failed to disclose important information to you, please call The Law Offices of Robert Wayne Pearce, P.A. Our firm has successfully represented individuals harmed by broker and investment advisor negligence or misconduct for over 40 years. Cases involving violations of FINRA rules are complex. Attorney Pearce has the expertise and experience to help you navigate any kind of securities or investment dispute. Contact our team today to discuss an evaluation of your potential case. Our team has recovered over $140 million...

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Understanding FINRA Rule 2111: Suitability

As an investor, you may have heard of FINRA Rule 2111, also known as the suitability rule. But what exactly is FINRA 2111? And how does it affect you and your investments?  When you hire a brokerage firm or financial advisor to make transaction or investment strategy recommendations, you expect that they will do so in a manner that is suitable for you and your particular circumstances. Unfortunately, however, this is not always the case. If you have suffered financial losses as a result of unsuitable investment strategies and recommendations by your financial advisor, contact securities law attorney Robert Wayne Pearce today.  An Overview of FINRA Rule 2111 Suitability in investing is an overarching concept that describes whether an individual investment is suitable for a client after consideration of that particular client’s characteristics.  The suitability rule requires financial advisors to have a “reasonable basis” to believe that a recommended transaction or investment strategy is suitable for their client. A financial advisor determines the suitability of a particular transaction or investment strategy through learning about the investment profile of his or her customer. Experts interpret FINRA Rule 2111 as requiring financial advisors to make recommendations that are in their customer’s best interests. FINRA outlines situations involving financial advisors violating the suitability rule by placing their interests above the interests of their client, including: Financial advisors who recommend that clients use margin to purchase a larger number of securities to increase commissions;  Brokers who recommend unsuitable securities with high commissions because of pressure from their firm to sell the securities; or A broker who recommends one product over another with the goal of earning more commissions. Unsuitable investment recommendations lead to thousands of dollars in losses for investors every year based on financial advisors recommending products that are illiquid, speculative, and high-risk. If this has happened to you, contact an experienced investment losses attorney today to get started on your case. Suitability Obligations Imposed by FINRA Rule 2111 Rule 2111 consists of three primary obligations: reasonable basis suitability, customer-specific suitability, and quantitative suitability. Reasonable Basis Suitability Reasonable basis suitability mandates that a financial advisor have a reasonable basis, based on reasonable diligence, to believe that a recommendation is suitable for the public at large. This reasonable diligence should provide the financial advisor with a basic understanding of risks and rewards associated with the recommended transaction or investment strategy.  A broker must comprehend the risks and rewards associated with a particular investment. Failure to do so and recommending the investment to a client anyway could result in charges of misrepresenting the investment.  If a broker fails to comply with any of these requirements, the reasonable basis suitability obligation is not met.  Customer-Specific Suitability Customer-specific suitability involves considering specific details about an individual customer to determine whether a transaction or investment strategy is suitable.  A customer’s characteristics that are to be considered during a suitability analysis include: Employment status, Age, Financial situation, Tax status, Experience investing, Investment goals, Risk tolerance, Liquidity needs, and Investment time horizon. The financial advisor should evaluate these characteristics in determining whether the investment or strategy is suitable for that particular customer. Quantitative Suitability The quantitative suitability element evaluates the volume of trades made by a financial advisor.  For a quantitative suitability analysis, transactions made in a customer’s investment account are viewed in the aggregate. The question is whether the investments recommended qualify as a suitable strategy overall, not whether each individual transaction was suitable. The quantitative suitability obligation seeks to prevent financial advisors from making excessive trades in a client’s account solely for the purpose of generating commission fees.  Contact an Investment Loss Attorney Today FINRA 2111 investment loss cases can be particularly complex. That’s why it is important to have an experienced investment loss attorney in your corner.  Since 1980, the attorneys at The Law Offices of Robert Wayne Pearce, P.A., have represented countless investors as they fight for their rights. If you are a victim of broker negligence or misconduct, we want to help. We have recovered over $140 million for well-deserving clients, and we will fight to get you the results you deserve too.  Contact our team today for your free case evaluation, and see what we can do for you.

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FINRA Rule 2010: Standards of Commercial Honor and Principles of Trade

FINRA Rule 2010 states that FINRA members must observe “high standards of commercial honor and just and equitable principles of trade” in the conduct of their business. If you think this rule seems broad, that’s because it is. And unfortunately, FINRA members do not always live up to these high standards prescribed in FINRA Rule 2010. So what do you do if your broker or financial advisor has failed to comply with its obligations under FINRA 2010? Broker misconduct costs investors millions of dollars in investment losses each year. Such losses are often the result of fraud, misrepresentation, or negligent supervision of your account. While such misconduct can result in severe financial ramifications for you, fortunately there are avenues to hold these wrongdoers accountable.  If you suffered losses that you believe are a result of your broker failing to uphold the high standards of commercial honor and equitable principles of trade, contact The Law Offices of Robert Wayne Pearce, P.A. Discuss your case with an experienced investment loss attorney as soon as possible to see how you may be able to recover.  Overview of Other Notable FINRA Rules Typically, FINRA Rules outline the specific conduct prohibited by the rule itself. For example: FINRA Rule 1122 prohibits FINRA members and other individuals from filing membership or registration information with FINRA that contains incomplete or inaccurate information; FINRA Rule 2111 requires brokers to only recommend investments or investment strategies that are suitable for the client; and FINRA Rule 5270 prohibits the front running of block transactions. So where does FINRA Rule 2010 come into play?   Oftentimes, investors utilize Rule 2010 to address misconduct not described in other FINRA rules. Rule 2010 operates as a catch-all provision to protect investors from financial negligence and other unethical practices by financial advisors and institutions.  What Does Rule 2010 Prohibit? Rule 2010 sanctions brokers for bad faith or unethical “business-related” misconduct. Receiving a sanction under Rule 2010 does not necessarily mean the broker violated the law, even though a securities law violation on its own supports a finding that a broker violated Rule 2010. Conduct deemed unethical or immoral, though not necessarily prohibited by law, authorizes discipline under the rule. Business-Related Requirement FINRA Rule 2010 mandates that the alleged misconduct be business-related to qualify for discipline under this rule. In a 2019 FINRA disciplinary action, a FINRA Hearing Panel explained that the relationship between the FINRA member’s unethical actions and the conduct of his or her securities business do not have to be closely connected. Rather, the Panel implied that Rule 2010 extends to any misconduct that “reflects on the associated person’s capacity to comply with the regulatory requirements of the securities business and to fulfill [his or her] fiduciary duties in handling other people’s money.” Examples of FINRA Rule 2010 Violations Ultimately, every case alleging violation of Rule 2010 requires individual analysis to determine if the misconduct amounts to a violation of the rule. To determine whether the rule was violated, evaluation of both the totality of the circumstances and the context of the misconduct is required. Remember, a Rule 2010 violation occurs even in circumstances when a broker does not commit a violation of state or federal law. Actions considered a violation of Rule 2010 include: Misappropriating funds from clients or an employer; Sharing the confidential information of customers without approval; Forging signatures; Making alterations to important financial documents; Soliciting donations for personal benefit or other unauthorized uses; Misrepresenting financial information to customers; and Refusing to pay attorney fees and other expenses after initiating litigation against a customer. Rule 2010 allegations arise frequently in conjunction with allegations that a broker violated another FINRA Rule. Contact an Investment Loss Attorney to Answer Your Rule 2010 Questions Arguably at the core of securities regulation is FINRA 2010. Without such a rule, FINRA members would have no overarching obligation to conduct their business with such high standards of honor and integrity. Of course, even with Rule 2010 in place, FINRA members will inevitably fall short of these standards. When they do, know you can turn to The Law Offices of Robert Wayne Pearce, P.A. With more than 40 years of experience representing investors and holding their brokers and financial advisors accountable for misconduct, you can be confident that our team has the knowledge and resources necessary to fight for you.  Attorney Robert Pearce has a strong record of success, recovering funds for more than 99% of his investor clients. To discuss your case and start the process toward compensation, contact us today for a free case evaluation.

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Excessive Buying and Selling of Securities to Generate Commissions Is Called Churning – Is It Happening to You?

Many people often ask, Is churning illegal? The answer is yes. SEC regulations and FINRA rules prohibit the practice of making excessive purchases or sales of securities in investor accounts for the primary purpose of generating commissions, known as churning. Despite the illegality of churning, FINRA filed 190 arbitration actions for the year of 2020 through the end of December against brokers accused of the practice. If you suffered losses in your investment account as a result of excessive trading, contact a churning fraud lawyer to determine whether you are entitled to recover compensation.  What Is Churning in Finance? Churning, also known as excessive trading, takes on a new meaning in the financial industry that doesn’t have anything to do with butter. Excessive trading occurs when a broker makes multiple trades in a customer’s investment account for the primary purpose of generating high commissions. Churning often results in significant losses for investors. The SEC’s Regulation Best Interest, or Reg BI, establishes a standard of conduct for broker-dealers and their employees when recommending investments to retail customers. Reg BI requires brokers to act in the customer’s best interest and not place his or her own interests ahead of those of the investor. Churning is almost never in the best interest of the investor—even those with aggressive trading strategies. Signs Your Advisor Is Churning in Your Investment Account Churning stocks leads to substantial investor losses, especially in situations where it lasts for a long period of time. Many times, investors fail to recognize the indicators that their broker committed the crime of excessive trading until it is too late. There are a number of cautionary signs to look out for when you fear your financial advisor is excessively trading in your account. Unauthorized Trades Unauthorized trading occurs when a broker trades securities in your investment account without receiving prior authorization. If you have a discretionary investment account, your financial advisor has authorization to make trades in your account without seeking your approval for each transaction; however, your broker is still bound by the best interest standard. Excessive trading can be more difficult to detect with a discretionary account. Numerous unauthorized trades appearing on your account statement is a cause for concern. To recognize these transactions, you should review your account statement on a monthly basis and verify the information provided. If you observe unauthorized trades on your account statement, notify your broker and broker-dealer immediately.  Unusually High Trade Volume A high volume of trading activity in a short period of time can signify churning, especially for investors pursuing a conservative investment strategy. Pay special attention to transactions involving the purchase and sale of the same securities over and over. Attorney Robert Pearce has over 40 years of experience representing clients whose brokers’ misconduct caused financial losses. Mr. Pearce’s extensive experience enables him to recognize indicators of churning immediately and prove the amount of damages you suffered as a result of your broker’s misconduct.  Excessive Commission Fees Unusually high commission fees appearing on your account statement is another indication of excessive trading. If the commission fees jump significantly from one month to the next, or if one segment of your investment portfolio consistently generates higher commissions than any other segment, there is a chance your broker is churning your account. Account statements do not typically include fee amounts charged for each individual transaction. Thus, do not hesitate to contact your broker-dealer to request an explanation of the commissions charged to your account. If you feel you are being charged excessive fees in your investment accounts, contact The Law Offices of Robert Wayne Pearce, P.A., to discuss your options.  Contact Our Office Today for a Free Consultation Churning in the financial industry can result in monetary sanctions and even disqualification from the financial industry in extreme cases. The practice involves the manipulation and deception of investors that entrust their brokers to act in their best interest, warranting severe punishment. Robert Wayne Pearce has handled dozens of churning cases and can provide a complete review of your account statements to determine whether excessive trading occurred. Additionally, The Law Offices of Robert Wayne Pearce, P.A., employs experts that can perform a churning analysis of the trading activity in your account to establish concrete evidence that the practice occurred. We have the experience, expertise, and commitment to obtain the damages you deserve. Contact our office today for a free case evaluation.

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