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Can Brokers’ Conflicts of Interest With Their Customers Be Managed?

Conflicting interests are not just a by-product of Wall Street’s business, they are the very essence of it.

The Financial Industry Regulatory Authority (FINRA) is reportedly interested in examining the conflicting interests that its member firms have with their customers.   (more…)

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Should FINRA Tolerate Known “Bad Apples?”

Should this type of elaborately planned financial dishonesty be tolerated by FINRA?

The Financial Industry Regulatory Authority apparently tolerates certain instances of clear and unequivocal dishonesty by brokers.  While the harm to investors that flows from that dishonesty may vary from Madoff magnitude to nothing, dishonesty – when it is irrefutable – should not be tolerated by an industry that holds itself out as trusted professional financial advisors.  Yet it is tolerated. (more…)

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From ‘Trust Us’ to ‘Get Lost’

But, complain about mistreatment at the hands of their employees, and they’ll be telling you to get lost quicker than you can say “false advertising.”

Among the questions I get most often is “I’ve got my money with _____, a big brokerage firm, so I don’t need to worry about fraud, right?” They’re always disappointed with my answer. A recent case from Florida illustrates why even having a solvent brokerage firm behind your financial adviser is very little protection, and how brokerage firms really view clients who complain about mistreatment. According to Orlando Sentinel: (more…)

Merrill Lynch Consents to Sanction for Cheating Muni Bond Investors

That such a finding is not newsworthy should speak volumes to you about the danger of the investing landscape.

There is so much misconduct in the securities industry that reporters have given up on covering all of it. And for a very practical reason; it would be like writing a story every time a driver was stopped for exceeding the speed limit on the local interstate. Sure, it’s a violation of the law, but it happens so often that they could write about nothing else. And so, a recent disciplinary action against Merrill Lynch by the Financial Industry Regulatory Authority (FINRA) didn’t warrant a mention. (more…)

FINRA Oversight Threatens Last Bastion of Investor Protection

Why would we want an organization committed to a lower duty to investors to regulate those with the highest duty to investors?

Back to our multiple choice questions. If you missed the first question, you can see it here.

Who do you want guarding the hen house?

a) the chicken farmer,

b) Brinks,

c) Navy Seals,

d) The National Association of Foxes. (more…)

Former Wells Fargo Broker Shown the Door

Vigilant investors long ago jettisoned romantic notions of the stockbroker as protector of the nest egg.

A recent enforcement action from the Financial Industry Regulatory Authority (FINRA) answers one of the questions I get most often: “If I’m with a big name brokerage firm, I don’t have anything to worry about, right?” According to FINRA, Ralph Edward Thomas Jr., while a representative for Wells Fargo Advisors, stole money from many of his clients. One of the accounts from which he stole was set up to benefit a child suffering from cerebral palsy. According to a story from Investment News: (more…)

Life Settlements and Promissory Notes Top FINRA’s 2012 Watchlist

You should never invest in anything that involves a promissory note unless you have done a thorough due diligence investigation.

The Financial Industry Regulatory Authority (FINRA) has released its 2012 Watchlist of investments that present a potential danger to investors. At the top of the list are life settlements, which are investments in a policy insuring the life of someone else, usually someone elderly. News of the abuses in the life settlement industry have swamped any positive stories. People who offer such investments routinely fail to make the premium payments necessary to keep the policies in effect and often descend into outright Ponzi schemes. (more…)

The Price of Admission? Your Constitutional Protections.

At a time in history when investors need access to justice more than ever before, the securities industry keeps the doors of the courthouse closed.

The  U.S. Constitution is an amazing document; “the law of the land.” While people point to the U.S. President as our counterpart to the kings and queens of other countries, that’s not accurate. Our king, if we can be said to have one, is the Constitution. Our chief executive swears his allegiance to it upon taking office. It has given us one of the world’s longest surviving republics. The remarkable men who drafted the document enshrined certain rights of individuals in the first ten amendments to the Constitution. Among those fundamentals rights was the right to a jury in civil trials, enshrined in the Seventh Amendment, which provides: (more…)

FINRA Tells Its Membership to Do a “Reasonable” Investigation of Private Placements

FINRA members love to sell private placements for one reason: they pay huge commissions, far bigger commissions than stocks, bonds, or mutual funds.

The Financial Industry Regulatory Authority (“FINRA”) has issued Notice to Members 10-22, which reminds FINRA’s brokerage firm members of their obligation to “reasonably” investigate private placement offerings that they sell to their customers.  Private placements are unregistered securities which are available only to wealthy investors.  The mistaken assumption behind allowing the sale of these loosely regulated securities is that wealthy people are sophisticated enough to protect themselves from fraud.  Yet, some studies suggest that more sophisticated investors are more likely to fall for a financial scam than investors with less financial experience. (more…)

SEC Charges Two Sacramento Men with Stealing $10 Million

SEC Charges Two Sacramento Men with Stealing $10 Million

According to the U.S. Securities and Exchange Commission, Lawrence “Lee” Loomis and his father-in-law John Hagener defrauded 100 investors out of $10 million by soliciting investments in supposed loans to homebuyers to be secured by real estate deeds of trust. According to the SEC, the defendants told prospective investors that the investments would be put into safe “liquid high-yield accounts” earning 12 percent and that the investments were guaranteed by a third party. (more…)

The Wrong Kind of Help

This time last year four people (three men and a woman), clad in bullet proof vests, wearing ear-pieces, and sporting at least one stun gun walked into the Folsom, California offices of Equity Investment, Management and Trading Inc.,  operated by accused Ponzi artist Anthony Vassallo, and said that they worked for the FBI and the Securities and [...]

This time last year four people (three men and a woman), clad in bullet proof vests, wearing ear-pieces, and sporting at least one stun gun walked into the Folsom, California offices of Equity Investment, Management and Trading Inc.,  operated by accused Ponzi artist Anthony Vassallo, and said that they worked for the FBI and the Securities and Exchange Commission.  They demanded that Vassallo wire more than $300,000 to a specified bank account.  Vassallo wired no money.  Likely, there was no money left.  As it turns out, the four were trying to recover the investments of four victims of the alleged Ponzi scheme.   (more…)

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