In April 2012, Congress enacted the "Jumpstart Our Business Startups Act"-or JOBS Act-as part of the federal government's ongoing efforts to stimulate the economy. The Act was intended to spur small business growth by loosening decades-old rules prohibiting the solicitation and sale of private placement investments to the general public. Through the new "crowdfunding exemption" to the registration requirements of the Securities Act of 1933, Title III of the JOBS Act gives startup companies the go ahead to raise up to $1 million in investment capital per 12 month period from everyday (e.g., non-accredited) investors.
The virtual currency Bitcoin was the subject of a hearing held this week by the U.S. Senate Committee on Homeland Security and Governmental Affairs. The hearing focused on potential implications of the rise of virtual currencies, also known as digital currencies, in today's market. Appearing at the hearing to testify regarding the benefits, risks and potential regulation of virtual currencies were representatives of the Department of Justice, the Secret Service, the Department of the Treasury, and the Bitcoin Foundation, among others.
The Financial Industry Regulatory Authority ("FINRA") is making it easier than ever to research an investment professional's background. On November 12, 2013, FINRA announced its release of an enhanced version of BrokerCheck, the online tool that allows investors to check the background of registered brokers and brokerage firms. In its news release, FINRA described the improved BrokerCheck as more intuitive, user-friendly, and a quick source of information that "can help [investors] decide if an investment professional is right for them."
Hedge fund SAC Capital Advisors has agreed to pay $1.8 billion in fines and plead guilty to securities fraud charges, according to United States prosecutors. Manhattan federal Judge Laura Taylor Swain issued an order today setting a hearing for this Friday, where SAC Capital will plead guilty to every count on the insider-trading indictment issued by the U.S. Attorney's office in July. The indictment included allegations that SAC Capital principals, including Steven A. Cohen, ignored indications SAC Capital's employees engaged in widespread insider trading based on illegal tips for over ten years. Some of the insider trading included high-profile stocks such as Intel, Yahoo, Blackberry, and Elan. In addition to pleading guilty to securities fraud and wire fraud charges, SAC Capital agrees to shut down its investment advisory business. Earlier this year, the SEC fined SAC Capital $616 million for civil insider-trading charges. Prosecutors hope the massive fine will send a message to other Wall Street firms that this type of misconduct will not be tolerated.
The Financial Industry Regulatory Authority (FINRA) released a new report regarding conflicts of interest in the broker-dealer industry. FINRA began working on the report last year, when it started gathering data from 14 large firms regarding compliance procedures in place to monitor and prevent conflicts. The report urges broker-dealers to manage conflicts by closely managing broker compensation and reviewing new financial products. Also, when firms identify potential conflicts regarding new products, "plain English" disclosures are preferred. Clear, plain English disclosures may avoid the problems of less knowledgeable investors misunderstanding potential conflicts with complex financial products.
Good news for registered reps seeking to expunge customer complaints from their CRD records. A report recently issued by PIABA, the association of lawyers who represent aggrieved investors, reveals that brokers were able to obtain the approval of arbitration panels to expunge the customer complaints from their CRD records in an astonishing 96.9 percent of cases settled from May, 2009 through December, 2011. Typically, these CRD expungement requests are made by the broker or his firm after the case was settled and the firm, not the broker, paid the settlement amount. A typical aspect of pre-hearing settlements requires the customer to agree not to oppose, and to cooperate, with the broker's application to the Panel to expunge the complaint from his or her record. The Financial Industry Regulatory Authority (FINRA), the private corporation that is the brokerage industry's self-financed policing arm, maintains Broker-Check and the CRD system which lists all customer complaints and other negative items about each registered representative and firm. This unusually high percentage of successful expungement requests is even more surprising since the FINRA rules list only 3 very narrow grounds for expungement: 1) The claim or allegation against the broker is factually impossible or clearly erroneous; 2) the registered person was not involved in the alleged investment related violation; and 3)the claim or allegation against the broker is false. The results of the study reveal that even with such specific, narrow grounds for expungement, crd expungement is almost universally granted by panels, on request, after the case has been settled. We have successfully handled many expungement requests. Contact us to discuss your particular situation.finra expungement; crd expungement
FINRA recently issued new guidance to arbitrators further tightening the already limited grounds under which brokers may obtain expungement of customer information from their CRD record. The move follows a recent tide of criticism against FINRA and the SEC for, critics say, looking the other way when member firms, registered representatives and their attorneys require customers to agree not to oppose expungement requests as a condition of settling FINRA arbitration claims.
Most of us who follow Ponzi schemes, scams and scoundrels remember R. Allen Stanford's long standing Ponzi scheme. He now resides in a Fed Pen, serving a 110 year sentence for running a 20 year scam which offered high-interest cd's purportedly on deposit with the Stanford Int'l Bank in Antigua. The only catch was there never were any CD's. Any money paid to early investors came directly from new pigeons snared in the fraud. Investors left holding the bag sued law firms, insurance brokers and financial service companies saying those intermediaries also bore responsibility for the fraud. The defendants moved to dismiss the class actions, alleging they were barred by the Securities Litigation Uniform Standards Act of 1998. The plaintiffs, in turn, argued that, since the "investments" never actually existed, they were not "covered securities" under that act and their state court class actions should be allowed to continue. The Supreme Court heard lively argument on the first day of its new term. The issue the Court will have to resolve is whether a security that never existed can, in fact, be a "covered security". Ponzi Schemes are as ubiquitous as they are pernicious. But there seems to be no shortage of takers willing to buy investments that never exsited. If you have been the victim of a Ponzi Scheme, or are being sued in a "claw-back" case, contact us.
Securities and Exchange Commission Chair Mary Jo White recently announced plans to widen the scope of SEC enforcement to investigate, uncover and punish smaller violations of securities regulations. In her speech before the Securities Enforcement Forum last Wednesday, White emphasized the goal of SEC enforcement to be "everywhere, pursuing all types of violations of our federal securities laws, big and small." She likened this approach to the "Broken Windows" theory: just as a broken window left unfixed "is a signal that no one cares, and so breaking more windows costs nothing," overlooking or ignoring minor securities violations "can feed bigger ones, and, perhaps more importantly, can foster a culture where laws are increasingly treated as toothless guidelines."
On Friday, the Financial Industry Regulatory Authority (FINRA), Wall Street's largest self-regulatory agency, announced it would consider whether broker-dealer firms should be required to carry insurance to help ensure payment of arbitration awards issued through FINRA's dispute resolution forum. Virtually all broker-dealers require their customers and employees to arbitrate any legal claims--e.g., claims involving securities fraud, unsuitabile investments, breach of fiduciary duty etc.--through FINRA's arbitration division.