FINRA Foundation Releases Military Financial Capability Survey
(Dec 2013)
Yesterday, the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation announced the release of their National Financial Capability Study's Military Survey. The interactive results of the surveycan be accessed online. According to the foundation's president, the study finds that "most servicemembers are taking control of their finances. Three quarters have a retirement account, nearly 80 percent are living within their means, and many have participated in financial...
FINRA Announces Enhanced BrokerCheck System
(Nov 2013)
Yesterday the Financial Industry Regulatory Authority announced an enhanced version of their BrokerCheck system. We regularly suggest that investors consult FINRA's BrokerCheck since these records contain important information about complaints and specific actions about individual brokers and firms. According the FINRA Executive Vice President Derek Linden, investors "using BrokerCheck will encounter a more user-friendly interface that allows them to quickly find information that can help...
Brokerage Firm Fined for Misrepresentations Made to Former Broker
(Oct 2013)
When brokers sell unsuitable investments to their clients, it is often the case that those clients will sue the broker and the brokerage firm, a process known as 'broker-customer disputes.' What is less common is for brokers to sue the brokerage firm -- their own employer -- for encouraging them to sell risky investments that caused losses for their clients.
In a recent, closely-watched FINRA arbitration, Michael Farah of Newport Beach, California won approximately $4.3 million from his...
SEC Issues Proposal on Crowdfunding
(Oct 2013)
Yesterday, the Securities and Exchange Commission (SEC) issued proposed rules on crowdfunding to regulate the offer and sale of crowdfunding securities. The press release for the proposed rules can be found on the SEC website. These proposed regulations are meant to fulfill the SEC's requirements under Title III of the JOBS Act . We have previously discussed the JOBS Act crowdfunding provisions in the context of real estate investments, but the proposed rules cover all types of crowdfunded...
FINRA's Conflict of Interest Report
(Oct 2013)
On Monday, the Financial Industry Regulatory Authority (FINRA) published their Report on Conflicts of Interest "to better understand how [a number of a large firms] manage conflicts of interest and to identify effective practices to manage those conflicts." The report details observations made in connection with FINRA's targeted examination letter in July 2012 as well as in-person meetings resulting from that letter.
The report makes it clear that a well-defined framework is necessary for...
Another Non-Traded REIT Lists Shares, Revealing Losses
(Oct 2013)
Shares of non-traded real estate investment trusts (REITs) were sold in large amounts during the real estate bubble of 2005-2007. Without an observable trading price, sponsors simply fixed the share price of non-traded REITs at $10 per share. As real estate markets have collapsed and now begun to recover, it has been difficult to ascertain just how much those $10 shares have changed in value. Non-traded REIT sponsors are now required to estimate per-share net asset values, which have...
FINRA May Require Brokers to Carry Arbitration Insurance
(Oct 2013)
When investors suffer damages at the handsof brokers, they often turn to FINRA arbitration rather than suing in state or federal court. FINRA arbitrations are designed to "assist in the resolution of monetary and business disputes between and among investors, brokerage firms and individual brokers," and sometimes result in a monetary award. However, one problem with FINRA awards is that some brokers are unable to pay, especially brokers with small under-capitalized firms who ran fraudulent...
SEC Awards More Than $14 Million to Whistleblower
(Oct 2013)
Earlier this week, the Securities and Exchange Commission (SEC) announced that an anonymous whistleblower has been awarded over $14 million for the information provided to the SEC that resulted in an expedited enforcement action. This is the third, and by far the largest, award granted by the SEC's Office of the Whistleblower since it was established by the Dodd-Frank Act in 2011.1
Although the announcement does not specifically mention which enforcement action lead to the award, we can...
FINRA Files Cease and Desist RE: John Carris Investments and Fibrocell Science
(Oct 2013)
Yesterday, the Financial Industry Regulatory Authority (FINRA) announced a temporary cease and desist order against "John Carris Investments, LLC (JCI) and its CEO, George Carris, to immediately halt solicitations of its customers to purchase Fibrocell Science, Inc. stock without making proper disclosures."
According to FINRA's complaint, JCI manipulated the stock price of Fibrocell (FCSC) through unauthorized purchases and so-called 'matched trades'. In particular, between May and September...
SEC Proposes Rule for "Pay Ratio" Disclosure
(Sep 2013)
Last week, the Securities and Exchange Commission (SEC)released a rule proposalthat would require "public companies to disclose the ratio of the compensation of its chief executive officer (CEO) to the median compensation of its employees." The proposed rule gives companies flexibility with respect to the methodology used to calculate the pay ratio. This flexibility allows for a variety of approaches that are appropriate for each company's size and structure.
Although the SEC does not specify...
