As a Utah Securities lawyer, I’ve seen how investors work with a financial adviser or stockbroker because they feel their finances are in good hands. But many advisers abuse their position as fiduciaries to increase their own profits at their clients’ expense.
With your investments and savings on the line, you should choose a securities arbitration attorney with the requisite experience and securities industry knowledge needed to combat the brokerage firm’s “hired gun” lawyers.
Lawyers for Security Fraud Cases
Securities regulations revolve around the “fiduciary duty” that advisers and brokerage firms owe their clients. This duty arises out of financial professionals’ superior financial knowledge compared to the average investor, and the resulting potential for abuse. A fiduciary duty requires advisers to act in their client’s best interests.
Investors may not know it, but in most cases they sign away their right to a trial by jury when they open an account for a securities firm’s brokerage services. Instead, securities firms will typically require their customers to agree to arbitrate any issues before the Financial Industry Regulatory Authority (FINRA).
FINRAÂ is a self-regulatory organization responsible for promoting securities market integrity and resolving disputes between public investors, member firms, and firm employees. At the end of an arbitration proceeding, an arbitration panel issues a binding decision, which may include a monetary award to the investor as compensation for any investment losses resulting from broker misconduct. Arbitration awards are difficult to appeal, providing aggrieved investors comfort from the long, protracted process often present in typical court proceedings. The Utah Department of Consumer Protection as well as the Utah Securities Division of the State are agencies we work with as well as securities law firms
FINRA arbitration usually takes a little over one year from the time the claim is filed until a decision is reached. Importantly, FINRA requires a claim to be filed within 6 years from the time the alleged misconduct occurred, and oftentimes even sooner.
Common Types of Investment Fraud
Some investment schemes are outright scams.
I’m telling you this because I’ve seen all sorts of scams because I’m a securities lawyer in Salt Lake City Utah. If you did this enough, you’d see it too. I wish I was kidding. I’m not. Other investments are legitimate but present risks that may not be appropriate for all investors, or are not explained fully to the investor at the time of purchase. Under no circumstances may an adviser sell investments that are not offered by the brokerage firm they work for. Adviser conflicts-of-interest should also be disclosed.
Utah Attorneys at Ascent Law help investors recoup financial losses from fraudulent investment schemes involving many types of products, including:
- Structured Products
- Variable Annuities
- Oil and Gas Limited Partnerships
- Hedge Funds
- Precious Metals Fraud
- Private Placements
- Junk Bonds
- Ponzi Schemes
FAILURE TO SUPERVISE
The Financial Industry Regulatory Authority (FINRA) requires that securities firms adequately supervise their brokers to prevent securities law violations.
Investors who lose money as a result of broker misconduct may be able to file a claim for investment losses against the brokerage firm for failure to supervise.
BROKERAGE FIRM SUPERVISORY REQUIREMENTS
FINRA has three rules addressing brokerage firm supervision. These rules generally require firms to perform:
- Pre-hire broker screening
- Broker training
- Broker-investor transaction oversight
At the time a broker is hired, the brokerage firm should look into the agent’s background for any red flags, such as prior misconduct or disciplinary history.
In 2017, FINRA announced that it would emphasize firms’ hiring and monitoring of high-risk and recidivist brokers. Firms may be required to employ extra vigilance when supervising brokers with a spotty track record—and could be held to a higher supervisory standard if a high-risk/recidivist broker engages in misconduct. Research shows that almost half of advisers who are fired for misconduct are reemployed in finance within a year.
Firms must also ensure that new hires are licensed to sell securities and are current on training, including sales and product training and education in administrative procedures and federal securities compliance regulations. Training should include continuing education in FINRA rules compliance.
In addition, broker-client communications and transactions should be monitored. Firms, for example, should identify and investigate suspicious activity such as:
- Unsuitable investments
- Overconcentration
- Selling away
- Not providing accurate information to an investor
- Failure to report securities transactions
FIRMS MUST ADEQUATELY ENFORCE SUPERVISORY POLICIES
It is not enough for firms to simply put in place procedures that can detect broker improprieties. Firms also must have an adequate system for implementing and enforcing their supervisory policies.
FINRA allows some discretion when it comes to supervisory policies and controls, but firms are required to have:
- Written supervisory procedures
- Internal inspections
- Reviews of internal firm communications, customer complaints, and securities transactions
- Annual compliance reports
Free Consultation with a Utah Securities Attorney
If you are here, you probably have a securities law issue you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Recent Posts
Power of Attorney for Living Wills and Healthcare
Change of Circumstances and Grandparent Custody
Child Sexual Abuse Investigation
