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Baltimore Securities & Estate Planning Law Blog

Arbitrators May Soon Be Able to Request Enforcement Mid-Case

The Financial Industry Regulatory Authority (FINRA) has proposed a new rule in which arbitrators can refer a case for disciplinary action before it's over. Currently, arbitrators have to wait until a case is completely closed to report concerns to FINRA's Department of Enforcement. FINRA believes that arbitrators should take action as quickly as possible so the Department of Enforcement can uncover any threats to investors. FINRA is also concerned about evidence collection- they want to be able to collect all the evidence to prove or disprove the allegations of wrongdoing before it could possibly disappear.

Towson Broker and Signator Investors Ordered to pay $1.6 million to Three Investors

Signator Investors, a John Hancock company, and their former employee James Glover were ordered to pay investors $1.6 million by a FINRA arbitration panel. The three victimized investors met Mr. Glover at their church in Maryland. The investors claimed that Glover fraudulently induced them to purchase interests in a real estate venture known as Colonial Tidewater. The investors also claimed that Signator investors failed to properly supervise Glover's activities.

Regulators to Review Member Firms Cybersecurity Vulnerabilities

The Financial Industry Regulatory Authority (FINRA) will be reviewing twenty member firms in the coming months to evaluate the measures in which they take in protecting themselves against cybersecurity threats. FINRA wants to assess what types of threats are most prevalent and where firms are most vulnerable. FINRA is making this review a priority task. Cybersecurity is vital to ensuring that client information stays confidential and safe. The Securities and Exchange Commission (SEC) also has expressed concerns about cybersecurity and is planning unannounced examinations of firms. Both regulators are hoping their evaluations will enhance investor protection.

Philip Seymour Hoffman's Outdated Estate Plan May Cost His Family Millions

According to an Investment News' report, Philip Seymour Hoffman may have left his longtime companion and the mother of his three children, Marianne O'Donnell, with a large tax bill and outdated will. Under Hoffman's will, which was filed with New York City Surrogate's Court earlier this week, Hoffman left everything in his estate to O'Donnell. The couple was not married at the time of Hoffman's death and the estate will not be able to take advantage of the estate tax breaks reserved for spouses. Hoffman's will gives O'Donnell the option of disclaiming all or part of her inheritance which would allow the property to pass into a trust for the benefit of their oldest son. Unfortunately, Hoffman's two daughters were not born at the time the will was executed and were not named beneficiaries of the trust.

Regulators Keeping Close Eye on Alternatives and Complex Products

Earlier this year, the Financial Industry Regulatory Authority (FINRA) issued their 2014 Regulatory and Examination Priorities letter which outlines their annual goals to assist investors. The letter also included a number of product concerns. Among those products were alternatives and complex structure products.

Stifel Nicolaus and Century Securities Ordered to Pay $1 Million

Stifel Nicolaus and Company, Inc. and Century Securities Associates, Inc. were ordered to pay over one million dollars by the Financial Industry Regulatory Authority (FINRA) due to alleged sales practice abuses in connection with the sales of leveraged inverse exchange traded funds (ETFs). Since ETFs are so complex, it is imperative for the brokers to have the proper education before recommending them to clients. FINRA discovered that both firms' employees did not have a firm understanding of all the risks involved with ETFs. FINRA further found that Stifel and Century did not have the acceptable supervisory rules and guidelines in place that could have prevented the improper sales of the ETFs. According to FINRA's press release, "Stifel agreed to pay a fine of $450,000 and to make restitution of nearly $340,000 to 59 customers. Century agreed to pay a fine of $100,000 and to make restitution of more than $136,000 to six customers."

Beverly Hills Broker Bambi Holzer Barred From Securities Industry

In October 2013, Bambi Holzer, a Beverly Hills based broker to the rich and famous, was suspended from the financial industry after allegations of falsifying customer documents. Unfortunately for Holzer this was not her first time facing allegations of wrongdoing the Financial Industry Regulatory Authority (FINRA). Holzer's FINRA disciplinary report or "CRD" is 115 pages long with customer complaints alleging millions in damages. According to the Wall Street Journal, out of the approximately 550,000 registered brokers with FINRA, Holzer is in the top ten in terms of the number of customer complaints. In October, FINRA moved to bar Holzer from the industry. Holzer agreed to settle FINRA's allegations of wrongdoing.

Missing Broker Resurfaces After Missing for More Than a Year

Aubrey Lee Price, a Georgia investment advisor who allegedly of caused $40 million in damages to his clients, resurfaced. According to an Investment News article, Mr. Price was last seen in June 2012. In 2012, a Georgia court made a finding that Mr. Price was deceased. Now that Price is back and alive, he is facing criminal charges for bank fraud. Price allegedly raised $40 million from his clients through a private-placement fund which promised "positive total returns with low volatility." Price was arrested on New Year's Eve after a traffic stop. He is now facing up to thirty years in prison and a million dollar fine.

Merrill Lynch Advisor Sentenced to 33 Months in Federal Prison

Massachusetts regulators fined Merrill Lynch $500,000 for failing to supervise a broker who defrauded clients. The broker, Jane O'Brien, allegedly borrowed about $2 million from her clients. According to state regulators, O'Brien was one of the top producers in her Boston Merrill Lynch office. State regulators alleged that O'Brien's status as a top producer contributed to Merrill Lynch's faulty supervision. Merrill Lynch did not review her conduct until almost a week after O'Brien was indicted by the U.S. Justice Department. Since then, O'Brien resigned, was barred from the securities industry, and pled guilty to the fraud charges which resulted in a sentence of thirty-three months in federal prison and ordered to pay restitution in the amount of $240,000.

FINRA's New "Tone From the Top" Approach to Help Decrease Conflicts of Interest

The Financial Industry Regulatory Authority Inc. (FINRA) has issued a new report about conflicts of interest within its broker-dealer members. As a result of a study of fourteen member firms, FINRA formulated a policy known as "tone from the top" approach to help decrease these conflicts. This approach analyzes the policies and procedures governing the firm's top management officers and studies how those policies and procedures impact the entire organization. Many think that the report suggests that FINRA is beginning to inch closer and closer to a more fiduciary oriented standard for the disclosure of conflicts. FINRA is hoping that this report will help begin and continue to improve the manner in which conflicts of interest are handled.

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