New York Securities Fraud Lawyers Blog

Single and Special Purpose Broker-Dealers in the Crypto Securities Space

November 20, 2024 | Jacqueline Candella

In recent times, we have seen an increase in retail investors wanting to invest in cryptocurrencies. However, the unknown and unregulated aspects of the cryptocurrency world may deter retail investors from owning cryptocurrency coins and tokens outright. A seemingly safer way curious retail investors can invest in crypto is to purchase and hold crypto based securities at their brokerage firm. Retail investors may see this as a mode to protect the investments against additional volatility and to provide some sort of oversight, but should be wary. If your broker recommended crypto based securities that were not in your best interest, you should reach out to a Crypto-Securities law firm in New York, like Malecki Law.

Additionally, with recent crypto spot ETF approvals by the SEC (first – Bitcoin, and second – Ether), we may see integration of crypto based securities into retail investors’ accounts at traditional brokerage firms. In fact, many investments you already own may have their own exposure to crypto.

In line with the growing interest in owning crypto based securities, it seems as though more single purpose brokerage firms that sell only crypto based securities continue to enter the investment markets, like Galaxy Digital Partners, LLC or Grayscale Securities, LLC.

What is the Potential Impact of the Presidential Election on the Uncertainty of Crypto Regulation?

November 6, 2024 | Jacqueline Candella

Malecki Law’s founder, Jenice Malecki, was recently quoted in a Crypto Times article about crypto regulation as it relates to the impending presidential election.

Ms. Malecki shared her thoughts that no matter who is to be elected as President, that there is one obvious takeaway –“the crypto industry needs regulation.” Ms. Malecki further explained that the current non-regulation hurts investors, like yourself, which also gives room for bad actors to flourish. Did your advisor recommend that you purchase crypto based securities? It may not have been in your best interest based on your investor profile. A Crypto-Securities law firm in New York, like Malecki Law, can help you analyze and conclude whether Regulation Best Interest was violated.

Ms. Malecki and Malecki Law have experience in cases involving crypto based securities, and have seen that there is more work to be done. At least, if the product is clearly a security under the Howey test, the SEC will regulate it. However, if the crypto product is not clearly a security, there is more gray area as to which regulator (SEC or CFTC) has jurisdiction and why. This naturally leaves a gap in regulation, allowing misconduct to not just occur but to succeed without monitoring.

Malecki Law Founder Offers Insights on FINRA-Barred Brokers Continuing to Work in the Financial Services Industry

October 17, 2024 | Adam G. Schreck

Despite the weight that a FINRA Bar carries in the financial services industry, investigations show that barred financial professionals have had little trouble remaining employed in the financial services industry. Financial Advisor IQ, along with its sister publication Life Annuity Specialist, is conducting investigations into individuals barred by FINRA who continue to sell financial products, like insurance and annuities, to public investors under state-issued insurance licenses.

The publications have uncovered nearly 350 individuals who are barred by FINRA but maintain active insurance licenses in at least one state. These individuals often continue to sell financial products (other than insurance) to public investors well after they were barred from the industry by FINRA, but when pressed, merely disclose that they are selling “insurance.” If you have been defrauded by a FINRA Barred Broker, you should consult experienced Securities Arbitration Counsel, like the attorneys at Malecki Law in New York.

While insurance regulation varies state by state, some states treat a FINRA Bar as sufficient reason to revoke an individual’s state insurance license. However, other state regulators take a more laissez faire approach, requiring additional misconduct on the part of the barred individual before revoking their insurance license. The inconsistent approach amongst states leaves investors vulnerable to bad actors in the financial services industry.

SEC Approves FINRA’s Proposed Rule 3240 Change and Cites Malecki Law’s Public Comment

October 11, 2024 | Malecki Law Team

On September 17, 2024, the Securities and Exchange Commission (SEC) approved a proposed rule change to amend Financial Industry Regulatory Authority, Inc.’s (FINRA) Rule 3240, citing Malecki Law in their approval order.

Rule 3240 previously prohibited registered persons from borrowing from or lending money to their customers, with the five exceptions of immediate family members, a financial institution that regularly provides credit, both the customer and broker are registered representatives for the same brokerage firm, a personal relationship outside of the broker-customer relationship, or a business relationship outside of the broker-customer relationship. If your broker proposed a borrowing or lending arrangement, you should contact a Securities Fraud law firm, like Malecki law in New York, to consult whether the arrangement is proper under FINRA Rule 3240.

FINRA’s proposal aimed to amend the rule to “strengthen the general prohibition against borrowing and lending arrangements,” narrow the five exceptions above, modernize the first exception of “immediate family member,” and improve the notice requirements. In addition, FINRA proposed Rule 3240 to include pre-existing borrowing or lending arrangements, arrangements entered six months after the broker-customer relationship terminates, indirect arrangements with parties related to the registered person or customer, and owner-financing arrangements.

Malecki Law Files a Public Comment in Response to FINRA’s Proposal to Amend Rule 12800, Impacting the Application of the “Discovery Guide.”

October 3, 2024 | Malecki Law Team

FINRA has proposed a change to its Rule 12800, which addresses simplified arbitration involving cases of $50,000 or less. Specifically, the proposal, (Release No. 34-100204; File No. SR-FINRA-2024-008), would amend provision 12800(g)(1), giving customers in paper cases and special proceedings the option to elect whether they want Document Production Lists to apply to all parties. FINRA’s proposed change would increase customer fairness and awareness within simplified arbitration proceedings. If you sustained losses in your brokerage account, you need to speak with a New York Securities Fraud law firm, like Malecki Law, to review your portfolio.

Malecki Law submitted its public comment on the proposal on September 17, 2024, along with ten other people or entities that submitted comments, including professors of law school investor clinics. All relevant public comments are available here, and Malecki Law’s is available here.

FINRA Rule 12800 Currently

Malecki Law Had First Female-Led IPHC – Is Diversity in the FINRA Space on the Rise?

September 16, 2024 | Malecki Law Team

On Wednesday, September 4, 2024, Malecki Law had their first all-around all-female Initial Pre-Hearing Conference (IPHC). An IPHC is a conference that takes place after arbitrators have been selected and provides a first impression for everyone involved. The participants of the IPHC included a panel of three female arbitrators, two female attorneys representing their female client, a female opposing counsel representing the Respondent firm, a female legal extern of the Claimant’s law office, and a female FINRA staff member who coordinated the call. This IPHC makeup of all women was a first for Malecki Law. This begs some questions – how far has the securities arbitration and litigation field come in fostering a more diverse and inclusive environment, and what steps are being taken to continue to facilitate this growth?

Early traces of Diversity, Equity, and Inclusion (DEI) can be tracked down to the mid-1960s when societal movements and legal transformations began to mold the corporate world. The early 2000s saw DEI becoming a business imperative, as it was not only ethical to recognize its importance but also aided in business success. McKinsey & Company, a multinational strategy and management consulting firm, revealed in its report that companies with higher levels of diversity are more likely to have financial returns above their industry medians. FINRA also stresses the importance of DEI to provide a fair and efficient environment for investors, brokerage firms, and registered representatives. FINRA has stated that it is committed to continuing efforts to cultivate diversity, inclusion, and equal opportunity within the industry. Although there exists the need and recognition for diversity within securities arbitration and litigation , has this recognition translated into concrete results?

Currently, FINRA has facilitated efforts to recruit new arbitrators, particularly those from diverse backgrounds to magnify arbitrator diversity. Methods employed by FINRA to achieve its goal include outreach to one hundred minority and women’s organizations, attending conferences where individuals of varied backgrounds attend, and hosting events with diversity-based organizations. According to FINRA’s 2023 Demographic Survey, women make up 45% of joined arbitrators, yet the overall roster of arbitrators consists of 35% women. This portrays a minor increase compared to the overall roster in the 2022 Demographic Survey, which saw 33% of female arbitrators. Further, as of 2023, men made up 53% of arbitrators who have joined and increased to 63% of arbitrators on the overall roster. Moreover, in terms of diversity amongst mediators, according to FINRA’s 2023 Demographic Survey, women made up 33% of the entire mediator roster, only a 4% increase from the previous year. So far, diversity amongst genders in the industry is only inching its way up.

Malecki Law Founder, Jenice L. Malecki, to Speak at PLI’s Securities Arbitration 2024 Conference

September 9, 2024 | Malecki Law Team

On Tuesday, September 12, 2024, Malecki Law’s founder and owner, Jenice L. Malecki, Esq., will be speaking at the Securities Arbitration 2024 event. This conference is organized by the Practicing Law Institute (PLI). Ms. Malecki will be attending it, along with her Associates, Jacqueline Candella and Adam Schreck. The firm will listen to multiple panels consisting of panelists from a wide array of backgrounds, discussing various topics from Recent Developments in FINRA Arbitration and Mediation to Diversity, Equity, & Inclusion (DEI) in FINRA Arbitrations. The panelists and speakers are comprised of leaders and arbitrators in Financial Industry Regulation Authority (FINRA) Dispute Resolution, academics, and experienced attorneys who will walk participants through the most recent developments and challenges that propagate the field.

Ms. Malecki will be speaking on the discussion of Ethics – Avoiding the Ethical Mine Fields in the FINRA Forum, alongside the moderator Sandra Grannum and her colleagues Clint A. Corrie, Barry R. Lax, and Madelon Rosenfield. This panel will begin at 11:30 a.m. and will end at 12:30 p.m. and will dive into the ethical considerations for advocates and neutrals. Ms. Malecki is looking forward to helping attendees identify and deal with a variety of ethical issues including tainted evidence, lying witnesses, distressing discoveries during hearings, and disingenuous insinuations. Malecki Law is no stranger to these challenges acquired from their experience in representing investor arbitrations through FINRA generally, elder financial fraud cases specifically, as well as mediations and whistleblower fraud matters. Malecki Law also has extensive experience with intra-industry disputes including defamation claims, compensation claims, and the request to expunge registered representatives’ Form U5 due to defamatory language made publicly available by financial firms, as well as regulatory defense matters such as FINRA 8210 requests, SEC subpoenas, and investigations

Ms. Malecki enjoys presenting on panels and has spoken at many events over the years. She shares her knowledge gained from over thirty years in the securities industry practice and aims to mentor young lawyers. Some of her notable engagements include her appearances as an expert for Wall Street Journal Live, Fox Business News, and ABC’s Eyewitness News.

Post Summer Transitions: Industry Tip #1 – Beware of the Non-Compete Clause

September 3, 2024 | Adam G. Schreck

As the summer winds down and employees begin contemplating transitions to a new employer, financial professionals must be aware of the rules, procedures, and contracts impacting a potential transition to a new firm. To help keep financial professionals apprised of important considerations when changing employers, Malecki Law, one of New York’s experienced financial services employment law firms, created the Post Summer Transitions blog series. This blog will focus on one of the most important considerations impacting most transitioning employees regardless of the industry: non-competition agreements.

On August 20, 2024, Judge Ada Brown, sitting in the United States District Court for the Northern District of Texas, Dallas Division, issued an opinion and order setting aside the Federal Trade Commission’s (the FTC) recently implemented Non-Compete Rule, which was set to effectively outlaw non-competition agreements across the country in early September 2024. Judge Brown’s ruling is sure to impact employees working in nearly every industry and cause the FTC to rethink its approach to curbing unfair methods of competition in the context of employment relationships.

On April 23, 2024, the FTC announced a new, final rule banning most non-competition agreements nationwide. In announcing the new rule, FTC Chair Lina M. Khan explained that “noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism.” Further, the FTC expected the new rule to generate tens of thousands of new patents and thousands of new businesses each year, as well as allow the average employee to earn additional compensation amounting to more than $500 per year. The Non-Compete Rule was slated to take effect on September 4, 2024. If you are a financial professional who is experiencing non-competition issues with a previous employer, you should consult a seasoned Securities Employment lawyer, like the ones at NYC’s Malecki Law.

A Broker’s Perspective on Historic Arbitrations Should be Considered Before Determining Their Sanctions Pursuant to Rule 2010’s High Standards of Commercial Honor

August 30, 2024 | Malecki Law Team

Earlier this week at Malecki Law, owner Jenice Malecki was quoted in a Financial Advisor IQ article, titled, “Settled at Your Peril? Past Arbitration Outcomes Factoring into Finra Sanctions.”

The article discusses FINRA’s revised sanction guidelines in May 2018. The revision took an expansive approach to reviewing a broker’s past when deciding on their sanctions. Specifically, the revised sanctions guidelines indicated that adjudicators could also look to a broker’s past awards and settlements, outside of their own disciplinary history, in determining their sanctions. If you are a broker who feels like you have been unfairly sanctioned by FINRA, you need to reach out to a Regulatory Defense law firm in New York, like Malecki Law, for a free consultation.

A potentially controversial aspect of the sanctions guidelines is that not only can the broker’s historic arbitrations be considered, but arbitrations where they were not a named party but simply the subject of the claim, can be considered. This can be problematic as the investor Claimant made a choice to name the brokerage firm as Respondent and not the broker, sometimes, in making this decision, the investor may be attempting to avoid future consequences for the broker. However, unfortunately, the broker may still face consequences by virtue of being mentioned in the Statement of Claim. Are you a registered representative facing sanctions? You should consult a Regulatory Defense attorney, like the attorneys at Malecki Law in New York.

Retirement in an Ever-Changing Financial Market: Reg BI and KYC Implications

August 7, 2024 | Malecki Law Team

The alarming stock market decline on Monday, August 5, 2024, is a stark reminder of how important it is to plan for your future by educating yourself on the steps you can take to protect your assets, and how your financial advisor should be handling your account. Financial advisors must abide by industry rules and standards. Specifically, investment advisers are bound by the SEC’s Investment Advisers Act, which requires them to act in a fiduciary capacity putting your interests ahead of theirs, and brokers are bound by FINRA rules, which require brokers to act in your best interest in making recommendations. If you suspect that your financial advisor did not properly keep your liquidity needs or best interest in mind, you should consult with a securities law expert, like the attorneys at Malecki Law in New York.

In a concerning turn of events, the Dow Jones Industrial Average declined over 2.5% on Monday, August 5, while the S&P 500 lost 3%, and the Nasdaq index lost 3.4%. This decline allegedly stems from volatile tech stocks, increased unemployment and interest rates.

However, more importantly, financial advisors should keep a close eye on not only financial markets, but current events and world news. There may very well be signs that point to market declines before they occur, and while customers never want to lose money, there are specific customers, like those approaching retirement or who are currently retired, that may have a completely different set of goals and time horizons. For example, retired customers may not want to invest in volatile stocks, or trade aggressively because they may not have time to wait out a recovery in the markets. The onus is on your financial advisor to ensure that your investment strategy is in-line with your best interest, including, but not limited to, your personal liquidity needs, time horizon, and risk tolerance. If your investment strategy does not match up with your needs, or if your financial advisor does not take a proactive approach, you may have a case and should meet with an investor protection attorney, like the lawyers at Malecki Law in New York.