The Law Planet Blog

The Financial Industry Regulatory Authority (FINRA) released a 16-page letter announcing that it is issuing its 2010 annual examination priorities, on March 1st. The letter includes information on both new and existing areas of importance to FINRA’s yearly examination program. The letter discusses priority topics from FINRA’s Market Regulation and Member Regulation Departments, and the organization’s Enforcement Department.

The financial decline of 2009 exposed investment frauds “perpetrated by registered and unregistered parties”. As a result, the agency plans to heighten its focus, and to execute regulatory programs that are both rigorous and thorough. The idea is to provide investors with the best possible protection from investment fraud.

Some of the organization’s new developments include:

• The establishment of the Office of Fraud Detection and Market Intelligence in order to provide such services as a heightened review of serious fraud allegations;

• An expansion of BrokerCheck and other disclosure expansions to make it easier for investors to find information about brokers;

• A rule consolidation process designed to create a new consolidated rulebook; and

• The eFOCUS Filing Platform that will allow firms to submit certain reports to FINRA electronically.

FINRA encourages investment providers and investors to use the information in the letter to “gain valuable insights into key FINRA examination and regulatory topics.”

Click on the following link to read the 2010 FINRA Annual Examination Letter.

I am pleased to announce that yesterday our Investment Fraud Seminar in West Palm Beach was a huge success. It was held in the beautiful Phillips Point Club. The beautiful intracoastal was a great backdrop for this well attended Seminar.

The 4 hour seminar, Investing in a Post Madoff Environment: Financial Fraud: How it's accomplished, how to detect it, and how to recover from it was attended by over 100 people from South Florida. The attendees included, CPAs, Attorneys, Bankers, Financial Representatives and a host of other professionals. The Seminar was sponsored by the Financial Services Divsion of LaBovick & LaBovick, P.A.

Attorney Marc Dobin, Director of the Financial Services Division, led the discussions on how industry professionals can help prevent investment fraud.

Speakers at the Seminar included:

William Nortman, Esq., Akerman Senterfitt

Richard A. White, Turris Consulting, LLC

Moderator: Jeffrey S. Grubman, Esq, Jeffrey S. Grubman, P.A.

Topics coverd at the Seminar included areas such as: Investment fraud, Ponzi schemes, FINRA, Churning, Florida Investor Protection Act, Churning, and much more.

We look forward to sharing more information on our next educational seminar on investment and financial fraud.

If you would like to have a transcript of the seminar or more information on investment fraud, let us know.

Our vendor partner for this program, the Daily Business Review, will be publishing a printed version of the transcript in 3 - 4 weeks in their paper as a supplement.

Stay tuned...

LaBovick & LaBovick, PA filed a FINRA arbitration against Ameriprise Financial Services, (NYSE: AMP), formerly known as American Express Financial Advisors (AEFA) for stockbroker misconduct and negligence. The claim alleges that Deborah Amilowski, Financial Advisor for Ameriprise Financial Services, failed to properly advise a Senior investor on risks associated with unsuitable products for a person of that age, at the time of the initial investment and negligence in properly identifying the beneficiary resulting in additional loss to the trust.

The FINRA Statement of Claim, filed on August 13, 2009, stated that Ms. Amilowski, recommended a RiverSource variable annuity as an initial investment to a 77 year old investor at the time of purchase, thus ineligible for a guaranteed death benefit. This investment was too risky for someone of this age.

"Ameriprise Financial had the perfect opportunity to fix the problem, but compounded the error through their negligence and failure to act in the best interest of the client. Brokerage firms and their advisors must act with their client's best interest first. It is not acceptable for a firm to take advantage of Senior investors for profit," stated Marc S. Dobin, Esq., Director of Financial Services, LaBovick & LaBovick, PA.

Click on the following link to learn more on the FINRA Arbitration claim against Ameriprise Financial.

As part of FINRA’s ongoing effort to consolidate and reconcile the former NASD and NYSE manuals, changes are in the works. FINRA recently filed a proposed rule change that is going to make changes to FINRA suitability rules, as we have known them, noticeably different.

FINRA’s proposed rules governing Suitability and Know Your Customer Obligations will expand the obligations of registered representatives when recommending securities or investment strategies­ to customers. This is interesting because it looks like FINRA is moving towards codifying a fiduciary standard, or at least a modified fiduciary standard.

In the past, a fiduciary duty in a non-discretionary account related to only the execution of trades and custody of assets. Now, if an investment strategy encompasses assets away from the firm, that strategy falls within the proposed rule. For instance, the recommendation to retain stocks in an account at another brokerage firm may be considered recommending an investment strategy as may the recommendation to hold, and not sell, a particular stock.

This represents a significant change in the relationship a broker has with his/her client and will broaden the areas of responsibility when making suitability determinations.