New York Securities Fraud Lawyers Blog

Record Damages Awarded to Customers by FINRA Arbitration Panel in Case Involving Structured Notes Recommendations

April 10, 2025 | Adam G. Schreck

In March 2025, Stifel Financial was ordered by a three person FINRA Arbitration Panel to pay a family of customer investors over $132 million related to overwhelming losses caused by misrepresentations surrounding structured note investments. The landmark award included almost $80 million in punitive damages and over $25 million in legal fees. Although the Panel declined to provide a reasoned award, public reporting of the case indicates that the broker at issue did not understand and failed to disclose risks associated with the investments to the customers and also utilized unsupervised, off-channel communications in recommending the investments. If your broker or advisor recommended investments in structured notes without fully disclosing the risks and you experienced unexpected losses, you should consult an experienced securities attorney, like the ones at Malecki Law in New York City. Malecki Law has successfully represented structured note investors in the past.

Structured notes are hybrid securities that come in many different forms but typically include a debt component and derivative component. The debt or bond component represents the larger portion of the investment and provides principal protection, although investors in most structured notes risk losing their entire investment. The derivative portion of the investment is intended to amplify the return of the overall investment. This is usually achieved by allocating a portion of the investment amount to an underlying asset (i.e., stock), a group of assets, or an index. While the derivative portion of the investment is meant to increase returns, this portion can also dramatically increase losses, making structured notes appropriate for only the most sophisticated investors with high-risk tolerances.

Although structured notes can offer investors considerable returns, these investments often come with hidden risks. First and foremost, structured notes are often extremely complex products with highly customizable features. Rarely are they one size fits all. Next, structured notes are typically sold by institutions, so they experience higher rates of default risk compared to traditional bonds or equity. The variability in the terms of structured notes has also made it difficult for secondary markets to develop, meaning structured notes have low liquidity and investors should expect to hold the investments until maturity. If you’ve experienced losses in structured note investments recommended by your advisor or broker, you should speak with Malecki Law, a seasoned investor protection law firm in Downtown Manhattan.

Warren Buffett Is Taking Money Off the Table—Should Your Advisor Have Done the Same?

March 12, 2025 | Malecki Law Team

The stock market has been on a rollercoaster, and many investors—especially retirees—have seen their portfolios endure serious declines. Even Warren Buffett, one of the most respected investors in history, has been selling off stocks and reducing risk exposure. If a legendary investor like Buffett is pulling back, it raises an important question: Should your financial advisor have done the same to protect your retirement savings? If your investment portfolio has endured substantial losses, you should contact a securities law firm, like Malecki Law in New York.

If your portfolio was heavily invested in high-risk stocks, and you suffered major losses, it may be time to question the advice you received. Financial advisors are supposed to guide you through market ups and downs, keeping your retirement savings secure. If your advisor failed to adjust your investments when warning signs appeared, you might have been put at risk unnecessarily. You should have a free consultation with a securities lawyer in New York, like the ones at Malecki Law, to discuss your situation.

Why Did Warren Buffett Reduce His Market Exposure?

Retirement Portfolios and the Market Downturn: Did Your Advisor Prioritize Your Best Interests?

March 10, 2025 | Malecki Law Team

If you’re a retiree or nearing retirement, the latest market downturn may have shaken your confidence in your investments. Watching your portfolio take a hit right before retirement is more than frustrating—it can be devastating. At this stage in life, you don’t have decades to recover from financial losses like younger investors do. That’s why your financial advisor likely should have structured your portfolio with a long-term, conservative strategy designed to weather market swings, rather than chase risky stocks that were popular at the time. If this happened to you, you should reach out to a securities law firm, like Malecki Law in New York.

Regulation Best Interest (Reg BI) requires financial professionals to put their clients’ needs above their own. But what happens when an advisor fails to follow that rule? If your portfolio was built around the high-flying stocks of the moment rather than a balanced strategy designed to protect your retirement savings, you may have been a victim of poor financial advice—or even negligence.

Was Your Portfolio Built for Retirement Stability or Speculation?

Are We Facing a Pro Crypto-Securities Future in the U.S.? – Announcement of the New SEC Chair and the Future of Bill FIT21

December 16, 2024 | Jacqueline Candella

On December 4, President-elect Trump announced that his pick for the next Securities and Exchange Commission (SEC) chair would be Paul Atkins. There seems to be a positive response to the news, as Bitcoin quickly traded over $100,000.

As Malecki Law has previously blogged, the current chair, Gary Gensler, has often been perceived a crypto skeptic. Although crypto fans were seemingly hopeful that Hester Peirce would be appointed, a current commissioner who is also known as “Crypto Mom,” the community does not seem disappointed in the direction of the SEC at all. Malecki Law gets sometimes multiple calls a day from people scammed around crypto based investments. This is likely due to the lack of regulation. If your advisor recommended that you purchase crypto securities against your best interests, and you suffered losses, you may have a claim. You should reach out to a Crypto-Securities law firm in New York, like Malecki Law, to review your situation. If someone in a foreign jurisdiction has your money, you may be out of luck.

Future SEC Chair Atkins’ Background

Interplay of Elder Financial Fraud, Reg BI, and AML – Part 1

November 27, 2024 | Malecki Law Team

Every year, millions of elderly Americans fall victim to financial fraud due to their banks’ and brokerage firms’ failure to implement appropriate supervision over their client’s accounts and by their staff that are largely licensed. In 2023, there was a 14% increase in elder financial fraud complaints, with over $3.4 billion dollars in associated losses. The growing number of elder financial fraud cases calls on banks and other financial institutions to protect their consumers and increase the level of scrutiny on elder accounts.

Elder financial fraud is an act of deceit that specifically targets the funds, assets, and property of older adults. The frauds can take many forms, most commonly in investment scams, tech support scams, business email compromise scams, confidence/romance scams, and government impersonation scams.

Anti-Money Laundering (AML) measures play a vital role in hindering elder financial fraud because it equips financial institutions with the necessary tools to detect and prevent suspicious activities targeting older individuals. Financial Industry Regulatory Authority (FINRA) Rule 3310 requires that members develop and implement “a written anti-money laundering program reasonably designed to achieve and monitor the member’s compliance with the Bank Secrecy Act” and the implementation regulations issued by the Department of the Treasury. The AML programs must be able to reasonably detect and report suspicious transactions, comply with the Bank Secrecy Act, provide ongoing training for appropriate personnel, and include risk-based procedures for conducting customer due diligence. FINRA Rule 3310 establishes a comprehensive framework for brokerage firms to implement and closely manage to reduce older adults falling victim to financial fraud.

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