How to Handle an SEC Subpoena [Step-by-Step]

No one ever wants to receive an SEC subpoena, but when you do it is important to take action immediately so as to protect your future. In this article we will review what an SEC investigation subpoena is, the different types of SEC subpoenas you can receive, and what to do, step-by-step, if you receive an SEC investigatory subpoena. What is an SEC Subpoena? An SEC subpoena is a legal order for recorded testimony that is issued by the Securities and Exchange Commission in connection with one of its investigations. The subpoena requests documents, data, or both which are relevant to an ongoing investigation. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. Note: If you get served with an SEC subpoena, it means you’re likely under suspicion of committing or witness to securities fraud even though the SEC will tell you not to conclude anything from the fact you were served with a subpoena. It is strongly encouraged that you consult with a SEC defense lawyer. SEC Subpoena Power The Securities and Exchange Commission (SEC) is the federal agency responsible for enforcing securities laws, proposing new securities rules, and regulating the securities industry. The SEC has the power to investigate almost any company or individual for securities fraud. The SEC is primarily interested in issues involving potential stock manipulation, false or misleading statements in offering documents, insider trading, and other areas where investors are being cheated out of money. The staff of the SEC has subpoena power which they can use to compel individuals and companies under investigation to produce requested documents and/or testify at hearings under oath about their involvement with certain companies or businesses. If you receive an SEC subpoena, your life could be turned upside down until the issue is resolved. There are two types of SEC subpoenas: Subpoena ad testificandum: This subpoena compels the person to whom it is addressed to appear at a specific time and place and testify under oath or affirmation. Subpoena duces tecum: This subpoena compels the person to whom it is addressed to produce documents in his possession or control, either at a designated location or before the person who signed the subpoena. What happens when you get an SEC Subpoena?  When you get served with an SEC subpoena, it means that your records are being requested by a federal agency for an investigation. Generally, you’ll be told that you have 30 days from the date of service of this document to provide all records related to whatever it’s requesting. IMPORTANT: You will likely have to appear in front of a SEC enforcement official who may ask you questions under oath and subject to the penalty of perjury and/or making false statements to a government official. Do not lie about not having any records because if they come back and say you lied about having them, you could be charged with obstruction of justice. What should I do if I get an SEC Subpoena? Unfortunately, investigations by the SEC does happen from time to time. If you receive an SEC subpoena, it’s important to act quickly and be proactive. Below are the steps to take after receiving a subpoena from the SEC: Step 1: Consult a SEC defense lawyer who is experienced with SEC subpoenas immediately. Your lawyer will be able to guide you through the process and represent you during the investigation. An attorney can determine how to respond to your subpoena, what information you should immediately turn over, and help you avoid making any mistakes that could result in additional scrutiny or legal consequences. Step 2: Know your rights under the concept of “privileged” information. Under the attorney-client privilege, for example, you do not have to provide anything to the SEC if it would be between you and your lawyer. Step 3: Read the terms of the subpoena thoroughly. Make sure you understand them and determine what information must be turned over. If your subpoena requests specific documents, the SEC will likely want to review all of those documents. Step 4: Respond to the subpoena as soon as possible with an attorney by your side. Returning things too quickly without consulting a lawyer first could look bad for you during the rest of the investigation process. And if they ask for something that is difficult or unrealistic to produce, you can let them know that upon receiving their request. Some items may take longer than 30 days to find/produce depending on how easy it is for you to obtain (i.e., if there are thousands of emails it could take some time). Step 5: Keep a detailed record of all aspects of the process, including any contact or communication with an SEC investigator(s) so that you can protect yourself down the road with evidence in case there is any uncertainty about what happened during the investigation process. Step 6: Keep the details of your case confidential with yourself and your legal representation. Do not discuss or share information about your case with anyone who isn’t an attorney because you do not want to risk incriminating yourself. Step 7: Be proactive and do not engage in any activity that could be considered obstruction of justice, such as lying or concealing information. What types of records might the SEC subpoena? The Commission may subpoena documents related to financial transactions (including transfers of money between accounts), communications (including e-mails), photographs, videos, and other data like employment history or company policies/employee handbooks/training manuals. For example, the SEC may subpoena communications related to specific stock sales or actions taken during an acquisition. Schedule a Consultation with an Experienced SEC Defense Attorney If you are served with an SEC subpoena, you should promptly contact a lawyer experienced in representing parties dealing with federal investigations to guide you through how to handle your case and protect yourself. The Law Offices of Robert Wayne Pearce, P.A. has over 40 years of experience dealing with the SEC subpoenas and enforcement actions. Our attorneys can help you determine what information needs to be turned over, provide advice on how to handle...

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Margin Call: Definition, Triggers, & How They Work

Increased volatility in the market can sometimes bring about uncomfortable and surprising situations for investors, especially when it comes to margin calls. 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: what is a margin call; what triggers a margin call; what happens when you get a margin call; how long do you have to pay a margin call; what happens if you cannot pay the margin call; how you can avoid a margin call; and how to handle margin call liquidation. 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). Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. 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...

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Options Trading vs. Margin Trading: The Risks & Benefits of Both

When it comes to trading stocks and other securities, there are a few different approaches that investors can take. Two of the most popular methods are options trading and margin trading. Both of these strategies can be profitable, but they each come with their own set of risks and rewards. In this article, we’ll break down the key differences between options trading and margin trading. As an investor it is important to understand the risks and benefits of each before deciding if either of these investment strategies is right for you. What is the difference between options trading and margin trading? Margin trading offers investors a way to control a larger number of shares than they could with just their own money with the added risk that losses could be amplified. Options trading, on the other hand, provides investors to buy or sell securities at a later date for a set price and is considered to be low risk and low returns. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. Note: Trading on a margin is considered a risky investment strategy. If you have lost money due to an advisor or broker who has unsuitably recommended margin trading, you should speak to an experienced investment fraud lawyer to discuss your legal options. What is Options Trading? Options trading is a type of investing where you trade contracts that give you the right, but not the obligation, to buy or sell an asset at a set price on or before a certain date. Options are typically used as a way to hedge against other investments, or to speculate on the future price of an asset. When you buy an option, you have the right to buy or sell the underlying asset at a set price. If the price of the asset goes up, you can make a profit by selling it at the higher price. If the price goes down, you simply don’t exercise your option and don’t incur any loss. There are two types of options: call options and put options. What is a call option in stocks? A call option is a contract that gives you the right to buy an security at a set price within a certain time frame. The price you will pay for the security is called the strike price. The time frame in which you can buy the security is called the expiration date. If the stock price is above the strike price when the expiration date arrives, you will exercise your option and buy the stock at the strike price. If the stock price is below the strike price, you will let the option expire and not incur any loss. What is a put option in stocks? A put option is a contract that gives you the right to sell an security at a set price within a certain time frame. If the stock price is below the strike price when the expiration date arrives, you will exercise your option and sell the stock at the strike price. If the stock price is above the strike price, you will let the option expire and not incur any loss. What are the benefits of options trading? Options trading is a relatively low-risk way to invest in stocks and other securities. Because you are not obligated to buy or sell the underlying asset, you can simply let the option expire if it is not profitable. Options trading can also be used to generate income through premiums. When you sell an option, you collect a premium from the buyer. If the option expires without being exercised, you keep the premium as profit. What are the risks of options trading? The biggest risk of options trading is that you may not correctly predict the future price of an asset. If you buy a call option and the price of the underlying asset goes down, you will lose money. If you buy a put option and the price of the underlying asset goes up, you will also lose money. In order to make money from options trading, you must correctly predict which direction the price of an asset will move. Can you sue your broker for options trading losses? Yes, you can sue your broker for options trading losses. However, it is important to understand that your broker is not obligated to make money for you. They are only required to provide you with the resources and information necessary to make informed investment decisions. If you lose money due to bad investment decisions, you cannot sue your broker. What is Margin Trading? Margin trading is when you buy or sell stocks (or other types of securities) with borrowed money. This is also sometimes called “trading on margin.” The money you borrow is called a margin loan. This means you will be going into debt in order to make an investment. Typically the loan comes from your broker, and you will repay it with interest at a later date. Buying on a margin may have a lot of appeal compared to using your own money, but it is very important to understand the risks before you do it. Margin trading is a form of leverage. Leverage is when you use something (in this case, money) to control a much larger amount of something else. Note: If the investment doesn’t make money, you will have to pay back the loan with interest regardless. This means that the investment losses can be much greater than if you had just used your own money. What are the risks of margin trading? The biggest risk of margin trading is that you may lose more money than you originally invested. When investors trading on a margin and they experience losses, they may be required to pay back more money than they originally borrowed (Margin Call). A margin call is when your broker asks you to add more money to your account because the value of your securities has fallen. If you cannot afford to pay the...

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What Does a Securities Lawyer Do?

If you’re having difficulties with your financial advisor or broker and suffered investment losses, you might want to hire a securities lawyer who knows the securities laws and securities industry rules inside and out.  What Does a Securities Lawyer Do? A securities lawyer specializes in securities laws and regulations that apply to investors, brokers, and financial advisors. Securities lawyers represent investors claiming losses as a result of misconduct or fraud, as well as brokers and financial advisors accused of misconduct by their clients or their employers. Investment Losses? Let’s talk. or, give us a ring at 800-732-2889. Brokers and advisors provide investment advice and sell securities products such as stocks, bonds, and mutual funds. When you work with an advisor or broker, you probably signed an agreement that required them to comply with Federal and state securities laws and securities industry rules, including the rules requiring an advisor or broker to only make suitable investment recommendations and to act in your best interest. IMPORTANT: If your financial professional isn’t doing what was agreed to, or if you think they’ve committed securities fraud, you can file a complaint with the Financial Industry Regulatory Authority (FINRA). But before you do, you might want to talk to a securities lawyer. You have the right to seek compensation from the parties responsible if you were an investor who lost money as a result of broker misconduct. What Are Securities Laws? Securities laws are the laws that regulate the securities industry. The SEC (Securities and Exchange Commission) is the government agency that oversees the securities industry and enforces the Federal securities laws. These rules are designed to protect investors from fraud and other abuses, and to ensure that the securities industry operates fairly and transparently. Federal law requires companies that sell securities to register with the SEC. This registration process provides important information about a company’s business, its financial condition, and its management. It also gives the SEC important information about the people who sell the company’s securities. The federal securities laws also require those who sell securities to be licensed and to meet other standards of conduct. Investors and brokers use this information to make informed investment decisions. When brokers don’t disclose important information, or make false or misleading statements, they may have committed securities fraud. Further, the SEC provides a forum where investors can bring SEC complaints. The SEC may use these complaints to assist them in SEC investigations and the detection of securities fraud. In comparison to other areas of the law in the United States, there are few securities lawyers. Most lawyers who practice in this area work for the government, regulating or prosecuting firms and individuals who have violated securities law. It’s Important To Find A Good Securities Lawyer Who Represents Investors! There are a few lawyers who represent investors in private lawsuits and arbitrations against firms or individuals who have committed fraud and violated other securities laws. In order to sue someone for securities fraud, you must be able to prove that they made false or misleading statements, and that you relied on those statements to your detriment. Proving fraud can be difficult, and you should talk to a securities lawyer before you decide whether to sue. If you are an investor who suffered losses due to broker misconduct, you have the right to seek reimbursement from the parties responsible. Broker misconduct exists in multiple forms, including: Breach of fiduciary duty; Failure to disclose a conflict of interest; Churning, also known as excessive trading; Lack of diversification; Failure to adequately supervise; Misrepresentation; Omission of material facts; Unsuitable investment recommendations; Unauthorized trading; and  Misappropriating client funds.  While some forms of broker misconduct are easy to recognize, others are not. A financial advisor who stole funds out of your account and transferred them to a personal account clearly misappropriated your funds and committed misconduct. It’s more difficult to prove that a financial advisor recommended unsuitable investments, however, because the suitability of an investment depends on a number of different factors.  If you suffered investment losses and believe it was a result of broker misconduct, contact a good securities fraud lawyer today to evaluate your case.  Securities Laws are Complex and Numerous The laws that govern the securities industry are complex and numerous. This is partially due to the fact that the securities industry is complex and ever-changing. As new technologies and products are developed, they must be regulated. And as the markets change and evolve, the rules must change with them. This complexity can make it difficult for investors to understand their rights and what they should do if they think their broker has committed securities fraud. Below are just a few of the securities laws that may be relevant to your case: The Securities Act of 1933 Often called the “truth in securities” law, the Securities Act of 1933 has two main objectives: To require that companies disclose important information about their securities before they sell them; and To prevent fraud in the sale of securities. You can read more about the Securities Act of 1933 here. The Securities Exchange Act of 1934 The Securities Exchange Act of 1934 is often called the “most important securities law in the United States.” It created the SEC and gave it broad authority to regulate the securities industry. Among other things, the Securities Exchange Act of 1934 requires companies that sell securities to the public to disclose important information about their business, financial condition, and management. It also requires brokers and dealers who trade securities to be licensed and to meet other standards of conduct. You can read more about the Securities Exchange Act of 1934 here. Trust Indenture Act of 1939 The Trust Indenture Act of 1939 is a federal law that regulates the sale of municipal securities. Municipal securities are debt obligations issued by states, cities, and other government entities. The Trust Indenture Act of 1939 requires state and local governments to disclose important information about their finances before they sell municipal securities. It also prohibits them...

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What is Forced Liquidation?

If you find yourself reading this article, it’s likely because you’re going through a forced liquidation. Forced liquidation, sometimes referred to as forced selling, is the process by which an investor is forced to sell their assets, typically by a broker or financial advisor, in order to meet margin calls or repay debts. In this guide we will go over what forced liquidation is, how it works, and what you can do if you find yourself in this situation. What is Forced Liquidation? Forced liquidation, also known as forced selling, occurs when an investor is forced to sell their assets or securities, typically by a broker or financial advisor, in order to repay debts or meet margin calls. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. The term “forced liquidation” usually refers to the involuntary sale of assets, but it can also refer to the situation where an investor is given a choice between selling their assets or having them sold by the broker. Forced liquidation often happens when an investor has been unable to meet a margin call or has failed to repay debts. When this occurs, the broker or exchange will take possession of the assets and sell them in order to recoup the money that is owed. How Forced Liquidation Works If you find yourself in a forced liquidation situation, it’s likely because you have failed to meet a margin call or have been unable to repay debts. When this occurs, the broker or exchange will take possession of the assets and sell them in order to recoup the money that is owed. In most cases, the assets are sold at a loss, which can be significant. Forced Selling within a Margin Account If you have a margin account, your broker may force you to sell your securities if the value of your account falls below the minimum required amount. Within a margin trading account, this is known as a margin call. Your broker or advisor will typically give you a set period of time to bring your account up to the minimum value, and if you are unable to do so, they will sell your securities to repay the debt. It’s important to note that you may not be able to control which securities are sold, and you may not be able to get the same price for them that you paid when you purchased them. Forced Selling within a Securities-Backed Lines of Credit If you have a securities-backed line of credit (“SBL”), your broker or financial advisor may force you to sell your securities if the value of your account falls below the minimum required amount. Your broker or advisor will typically give you a set period of time to bring your account up to the minimum value, and if you are unable to do so, they will sell your securities to repay the debt. It’s important to note that you may not be able to control which securities are sold, and you may not be able to get the same price for them that you paid when you purchased them. What is margin call? A margin call is a demand from a broker or exchange for an investor to deposit more money or securities into their account. Margin calls are typically made when the value of the securities in an account falls below a certain level, known as the margin requirements. If an investor fails to meet a margin call within the grace period, the broker or exchange has the right to sell the securities in the account in order to cover the shortfall. Can a Broker Liquidate an Investor’s Account without Notice? Some investors learned the hard way the true meaning of “forced liquidation” when their brokers sold their securities without much warning in order to meet margin calls. In most cases, brokers will give investors a grace period to meet margin calls, and they are not required to sell the securities in an account without notice. There can be cases where a broker may sell securities without notice (a “Blow-Out), with the investor suffering substantial investment loss, this is typically only done in the most extreme cases where there is a fear of an imminent market crash and the broker wants to protect their own interests. We have heard from many investors that when they complained to their respective brokerage firms, they were told that they signed contracts that allowed the broker-dealers to do exactly what they did to them and that they had no recourse. Without doubt, contracts with those onerous contract conditions were signed, but that does not mean that the terms of the contract are enforceable. Can You Take Legal Action After a Forced Liquidation? If you have been the victim of a forced liquidation, there may be legal action that can be taken against a broker-dealer for breach of fiduciary duty and other causes of action. You may not have recourse for the issuance of margin calls and/or forced liquidations of all or some of your securities on short notice or no notice at all, but that doesn’t mean that the broker-dealer did nothing wrong. IMPORTANT: The most important question to ask is: what happened when the securities-backed line of credit and/or margin accounts were recommended by your broker or financial advisor to be opened in the first place. Depending on the situation that led to you opening up your securities-backed line of credit and/or margin accounts, you may have legal action you can take to help recover your investment losses. In some cases, the recommendation to open the account may have been unsuitable for you. In other words, if your broker or financial advisor recommended that you open an account that was too risky for you given your investment profile, then they may be held responsible for the losses that you incurred as a result of the forced liquidation. We’ve Helped Investors Who’ve Suffered Losses Due to Forced Liquidation The securities fraud attorneys at the Law Offices of Robert...

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How SEC Investigations Work: Process, Timeline, and Causes

You never want to be in the situation where the SEC is investigating you, but when they do, you must act quickly and decisively to minimize any harm. In this article, we’ll take a look at some of the most common reasons why the SEC might initiate an investigation into a company or individual, the SEC investigation process, how long SEC investigations take, and some steps you can take to protect yourself if it happens to you. What Causes an SEC Investigation? The SEC’s Division of Enforcement is in charge of investigating alleged breaches of securities law. Unregistered securities offerings, insider trading, accounting errors, negligence, market manipulation, and fraud are all common reasons for SEC investigations. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. The SEC may also investigate a company or individual if they receive a complaint from someone who has been harmed by the alleged violations. Note: If you are under investigation by the SEC, it’s generally safe to assume that you’re under investigation for or a witness to securities fraud. You are strongly enouraged to seek an expereinced SEC defense lawyer. There are Two Types of SEC Investigations: The SEC can conduct two types of investigations: formal and informal. Informal Investigations: For a vast majority of cases, investigations are informal. An informal investigation is less formal and typically occurs when the SEC has general concerns about a company or individual’s compliance with securities laws. The focus of an informal investigation is broader, and the SEC typically relies on information provided by the company or individual under investigation as well as other sources such as whistleblowers. This means that the SEC staff will review the facts and evidence available to them and make a determination as to whether or not an enforcement action is warranted. Following an informal investigation, the SEC may choose to take no action, issue a warning letter, or file a formal enforcement action. Formal Investigation: A formal investigation is more serious and typically occurs when the SEC has specific evidence that a violation of securities laws has occurred. In a formal investigation, the SEC will often use its subpoena power to obtain documents and other information from the company or individual being investigated. The SEC generally reserves formal investigations for more-important matters involving large sums of money or a large number of investors. However, this isn’t always the case, and Enforcement Division staff may elect to pursue a formal inquiry in any situation where it appears that administrative, civil, or criminal fines might be appropriate. All SEC investigations are conducted privately. Facts and evidence obtained by the SEC during an investigation are not made public unless and until the SEC files a formal enforcement action. What Happens When You are Under Investigation? First, you will NOT be told you are under investigation by the SEC. But you will likely receive a letter from the SEC’s Division of Enforcement with a Subpoena requesting documents and/or requiring you to give testimony. At that point, you can request the opportunity to view the Formal Order of Investigation with a summary of the investigation underway. It is a very general description and rarely identifies who or what conduct is under investigation. In most cases, it is important to respond to the SEC as quickly as possible and to provide them with all of the relevant information. Failure to respond or provide false information can lead to civil and criminal penalties. It is strongly advised that you seek legal representation if you are under investigation by the SEC before you respond to the SEC’s letter. An experienced securities defense lawyer will be able to help you navigate the process and protect your rights. What are the Risks of Not Responding to an SEC Investigation? If you do not respond to an SEC investigation, the SEC may take enforcement action against you. This could include filing a lawsuit against you or seeking a court order requiring you to take specific actions such as making restitution to investors or ceasing and desisting from certain activities. The SEC may also seek to bar you from working in the securities industry or from participating in penny stock offerings if you are a registered person. How Long Do SEC Investigations Take? The length of an SEC investigation can vary depending on the facts and circumstances of the case. However, in most cases, the SEC will take a many months to investigate a company or individual before making a decision on whether to take enforcement action. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. Of course there are factors outside of the SEC’s control that can also affect the length of an investigation, such as the availability of witnesses or the need to gather evidence from foreign jurisdictions. You can learn more about the SEC’s enforcement process by visiting the SEC’s website. What Happens After an SEC Investigation? After an SEC investigation, the Enforcement Division will decide whether to take enforcement action. Of course, the ideal case (when the SEC has started an investigation) is to conclude the inquiry with no evidence of wrongdoing. However, if the SEC’s Enforcement Division decides to take action, the division will file a lawsuit in federal court. The SEC’s litigation is generally public, and the agency will typically issue a press release announcing its action. The press release will include a summary of the allegations and the relief being sought by the SEC. Defendants in SEC lawsuits have the right to be represented by an attorney and to file a response to the SEC’s allegations. The litigation will proceed through the court system, and a final judgment will be issued by the court. What’s a Wells Notice? If the SEC decides that they want to pursue a formal enforcement action against you, they will send you what is known as a Wells Notice. A Wells Notice is a formal notification from the SEC that they are considering bringing an enforcement action against you for violating securities law. It gives you an opportunity to respond to the allegations...

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How to Sue a Financial Advisor or Stockbroker Over Investment Losses

If you’ve lost a significant amount of money in your investment portfolios, you could be wondering if you can sue your financial advisor or broker to help recover those losses. While every case is different, there are a number of factors that will influence whether or not you have a successful lawsuit. In this article, we will discuss some of the key things to consider if you are thinking about suing your financial advisor or stockbroker. Can I Sue My Financial Advisor? The short answer is yes, you can sue your financial advisor if you have suffered losses as a result of your advisor – or the financial institute they work for – actions or inaction. Securities and investment claims in the United States are usually resolved through FINRA’s arbitration procedure. Investment Losses? Let’s talk. or, give us a ring at 561-338-0037. IMPORTANT: If you are considering suing your advisor, it is important to seek legal counsel. Do not file without legal representation. Securities is a complex area of law, and without an experienced investment loss attorney, you may not be able to recover the full extent of your losses. A Financial Advisor’s Duty of Care People hire financial advisors and brokers to grow and protect their money. Financial advisors have advanced education and training, which should provide their clients with valuable insight and accurate financial advice. Individual investors expect that their advisors will not defraud or harm them in any other way. Market volatility is difficult to predict with any certainty. Markets dip and rebound over time. A financial advisor must guide you through those difficult times and offer you sound investment advice to minimize or avoid losses.  Some investments are riskier than others. Brokers and financial advisors need to understand their clients’ risk tolerance, as well as their clients’ investment needs. Losses could ruin years of hard work and financial planning.  Market volatility is one thing—negligence, deception, and fraud are something else entirely. Therefore, you should review your portfolio closely to see if you are a victim of misconduct.

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Can a Financial Advisor Steal Your Money?

Financial advisors are highly trusted professionals who help make decisions that impact your economic future. When that trust is broken through a bad or negligent act, the investor suffers and the financial advisor must be held accountable. When you’re looking at your investment losses, in the worst-case scenario, you may be asking yourself if a financial advisor can steal your money. Can Financial Advisors Steal Your Money? Yes, an unethical financial advisor can be in a position to steal money from you, especially if you have given them direct access to your money. Because of this, a vast majority of reputable financial advisors never take ownership of your money to protect your best financial interests. Need Legal Help? Let’s talk. or, give us a ring at 561-338-0037. It is recommended that you always keep control over your investments and never give any financial advisor full discretion over your accounts. Giving an advisor direct access allows them to steal money with ease. Avoid doing so unless you’re 100% confident in the individual you’re dealing with. Note: If you believe your financial advisor stole your money, there are several options for you to recover. We recommend speaking with an experienced investment fraud lawyer to learn more about your rights and how you may recover your losses. The Fiduciary Duty of a Financial Advisor All financial advisors are held to a standard of care when dealing with investors. Registered financial advisors have a higher fiduciary duty to their clients under the Investment Advisers Act of 1940. This is the highest legal standard of care and requires financial advisors to act in the best interest of their clients, make suitable investments, and disclose relevant information to you.  Knowing whether your financial advisor is registered with the U.S. Securities and Exchange Commission (SEC) or a state securities regulator is important because if the advisor breaches the fiduciary duty, you can bring a claim against the financial advisor through the Financial Industry Regulatory Authority (FINRA). FINRA is the governing organization that creates and enforces rules for advisors and their firms and assists in resolving disputes between advisors and investors.  Do You Have a Claim? If your financial advisor outright stole money from your account, this is theft. These cases involve an intentional act by your financial advisor, such as transferring money out of your account. However, your financial advisor could also be stealing from you if their actions or failure to act causes you financial loss.   Losing money through investment is not enough to bring a claim against your financial advisor. Remember, there is no guarantee of return when investing. Even if your financial advisor made the recommendation, under federal securities law and FINRA regulations, you cannot hold your advisor liable simply because they lost you money. You need a viable cause of action, such as a breach of fiduciary duty, negligence, or malpractice. Types of Claims Against Your Financial Advisor  Understanding securities law and FINRA regulations are crucial to know whether you have a valid claim against your financial advisor. The investment loss recovery attorneys at The Law Offices of Robert Wayne Pearce P.A. have over 40 years of experience in securities and investment law. They have helped countless investors recover their financial losses caused by bad or negligent acts by their financial advisors. The Law Offices of Robert Wayne Pearce P.A. have handled hundreds of cases involving many types of misconduct by financial advisors. Negligence In a negligence claim, you do not need to show that the financial advisor intentionally acted in a harmful way, but rather that the advisor failed to do something they had an obligation to do and caused the economic loss. For example, your advisor may have made an unsuitable investment by failing to take into consideration your risk tolerance. If you lost money based on the recommended investment, it may be appropriate to file a claim for negligence against your financial advisor.  Breach of Fiduciary Duty A financial advisor who breaches his fiduciary duty has failed to meet the required standard of care. You may have a valid claim for breach of fiduciary duty if your advisor failed to execute your stated objectives or did not disclose information about a product. Other examples of breaching the fiduciary duty include: Unauthorized trading, Unsuitable investments,  Undiversified portfolio, and  Account churning.  In each of these instances, the financial advisor did not act in your best interest.  Failure to Supervise A brokerage firm is responsible for supervising the actions of its financial advisors and any other employees. If the firm fails to do this, it can be held liable for your financial losses.  What You Can Do There are several stages of resolution to recover your financial losses. Depending on the facts of your case, you may be able to resolve it and recover without any formal proceedings, or you may have to litigate. The attorneys at The Law Offices of Robert Wayne Pearce P.A. have helped investors in all stages and have successfully recovered over $160 million in losses for our clients.  Review Customer Agreement If you believe your financial advisor stole money from you, either directly or indirectly through losses in your account, you should first review your customer agreement. Understand what sort of authority you gave your financial advisor and if there is a mandatory arbitration clause. This clause is common in most customer agreements with brokerage firms. These clauses often state that you waive your right to file a lawsuit against your advisor and agree to engage in a FINRA arbitration proceeding instead.  Informal Dispute Resolution Claims against financial advisors are incredibly complex legal matters. There are informal options available, however. Even at this stage, you should contact an investor loss recovery attorney for assistance. FINRA, which regulates the investment industry, instructs investors to first pursue informal dispute resolutions before filing a claim against their financial advisor.  Depending on the severity of the financial advisor’s misconduct, you may be able to resolve the matter directly with your advisor or...

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