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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.

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.

Malecki Law Founder, Jenice L. Malecki, to Speak at the Securities Experts Roundtable’s 2024 Annual Membership Meeting and Conference in Washington D.C.

July 26, 2024 | Malecki Law Team

On July 26 and July 27, the Securities Experts Roundtable is hosting its annual membership meeting and conference (the Conference) at the Sofitel Hotel & Resort in Washington D.C.

At the conference, Malecki Law Founder, Jenice L. Malecki, along with Colleen Diles of Diles Consulting and Gordon Yale of Yale Forensics, will be speaking on a panel focused on the expert witness mindset including how to stay present during depositions, how to handle opposing counsel’s attacks on credibility, and how to maintain a calm tone and demeanor. Ms. Malecki’s panel is titled “A Masterclass on the Expert Witness Mindset” and is set to take place from 3:30pm-4:45pm on July 26, 2024.

The Securities Experts Roundtable was established in 1993 and provides continuing education to securities professionals while promoting ethics and integrity in the securities dispute resolution field, particularly in the context of securities arbitration. Membership in this selective and prominent organization is comprised of expert witnesses, attorneys, consultants, academics, and financial professionals.

NYSBA’s Current State of Crypto Cases Panel

April 16, 2024 | Jacqueline Candella

On Wednesday, April 17, 2024, Malecki Law’s Jenice L. Malecki, Esq., will participate in a virtual panel organized by the New York State Bar Association (NYSBA). This is a joint effort by the NYSBA’s Commercial and Federal Litigation Section’s Securities Arbitration Committee and the Dispute Resolution Sections’ Securities Disputes Committee. Ms. Malecki will speak alongside her colleagues in the industry, Howard Fischer, and Joe Wojciechowski. If you incurred investment losses due to crypto-based products, you need to consult with a Crypto-Based Investment attorney in New York, like the lawyers at Malecki law.

The panel is called “The Current State of Crypto Cases: What Theories Are Being Developed to Support claims Relating to Crypto Losses?” It will begin at 12:00 p.m. EST and end at 1:00 p.m. EST. The panel will focus on liability related to crypto recommendations and broker-dealers. It is free to attend, please click here to register.

Ms. Malecki is looking forward to discussing her first-hand experiences with broker-dealer liability as it relates to crypto-based investment recommendations. Malecki Law has recently settled with a large crypto-based broker-dealer, where Ms. Malecki had the opportunity to learn more about broker-dealer liability in the context of crypto losses. Further, Ms. Malecki enjoys speaking on panels and sharing information with other lawyers in the industry, in an effort to protect investors like yourself. Did your broker recommend that you invest in crypto-based investments? Were those investment recommendations in your best interest? You should reach out to a Crypto-Based Investment law firm, like Malecki Law in New York.

Slow Progress for Women in the Financial Services Industry

November 27, 2023 | Malecki Law Team

In recent years, discussions about the gender pay gap have risen to the surface in a litany of industries and in just about every corner of the country. For far too long, women have earned less than their male counterparts, despite having the same, or better, job titles, backgrounds, and experience levels. In his article for Investment News, titled “’Murky disparity’ stalls progress,” Bruce Kelly explored the issue of gender pay disparities specifically as it relates to women working in the financial services industry.

According to the article, women only make up about 20% of financial advisors nationwide, and only about a third of the seats on the boards of S&P 500 companies are held by women. Jenice Malecki, the female founder of the New York-based securities law firm, Malecki Law, was quoted in the article, stating there are still plenty of pay disparities between employees of different genders at various firms. Ms. Malecki explained that she still gets contacted by women regarding their struggle with the glass ceiling they encounter in their employment and pay discrepancies. She added that, while some improvements have been made regarding pay disparities at the largest firms, those issues remain at firms that have smaller offices in various parts of the country. Smaller firms and satellite offices for larger firms generally operate with less oversight and supervision than their larger counterparts, allowing gender pay disparities to persist. If you are a female financial service professional and have suffered from unfair treatment at the hands of your employer, you should consult an experienced securities law attorney, like the ones at Malecki Law.

Another added layer to the pay disparity dilemma is the issue of transparency. Because of the lack of transparency, employees are unaware whether they are getting compensated equally as their peers. Few employees take the risk of complaining about this issue for various reasons, such as fear of retaliation or the loss of their job, so the lack of transparency remains, leading to the natural result of unequal pay. As Ms. Malecki explained in the article, many employees are not willing to challenge this unequal system, and as a result, numerous concealed disparities persist.

Theft in My Coinbase Account – What Can I Do Now?

November 13, 2023 | Jacqueline Candella

Malecki Law regularly receives calls from people distraught by having funds stolen from their cryptocurrency (“crypto”) accounts. Unfortunately, the scant regulation in the crypto space has yet to be fully tested. In fact, according to Reuters, “[the] illicit use of cryptocurrencies hit a record $20.1 billion last year…” However, if you lost money in your Coinbase account, you may have an avenue to recoup those funds. If funds were stolen from your crypto account, you need to contact a Crypto-Based Theft law firm in New York, like Malecki Law, to review your potential claim.

Interestingly, Coinbase markets itself as safe to customers by representing that it takes “extensive security measures” to ensure investors’ crypto investments are “safe.” Notwithstanding the supposed safety and security measures it has in place, Coinbase is reportedly prone to scams and hacks, which can result in theft from customers’ accounts. Crypto investors who have had funds stolen from their accounts often find themselves left with no way to get their funds returned to them, but there might be recourse. In January 2023, Coinbase settled with New York State’s Department of Financial Services (“DFS”) for $100 million due to cybersecurity, anti-money laundering (“AML”), and compliance-related issues. Specifically, Coinbase was ordered to pay $50 million in civil monetary penalties, and an additional $50 million “on further improvements and enhancements to its compliance program.” See In the Matter of Coinbase, Inc.

What is the relevant law providing for recourse? The Electronic Funds Transfer Act (“EFTA”) is a possible way to get your funds back.

Should Sports Betting Fall Under Securities Regulatory Scrutiny?

January 10, 2023 | Malecki Law Team

Introduction

Sports betting is an activity that originated in ancient times. Back then, people wagered currency, food, or even livestock. Today, we usually wager cash or other securities. Federal government entities never regulated sports betting activities. Originally, there were no rules to govern the use of the funds that were generated from sports betting activities and, as a result, a lot of organized crime ensued. Over the last 40 years, the federal government attempted to regulate sports betting to curtail this increase in organized crime. If you think you have been subjected to securities fraud, you need a New York Securities Fraud Law Firm like Malecki Law to review your portfolio, at no cost.

These governmental attempts to regulate sports betting were often met with the question of whether these efforts overstepped the federal government’s constitutional authority. This question was constantly debated until 1992 when Congress passed the Professional and Amateur Sports Protection Act (PAPSA). This act prohibited the states from sponsoring, operating, advertising, or promoting sports betting schemes. This act also applied, not only to the state level, but to individuals as well. Although Congress put its “foot down” on the issue of regulating sports betting, many states believed that PAPSA was an unconstitutional overreach of Congress’ authority. From 1992-2018, states continued to sponsor initiatives to regulate sports betting within their own jurisdictions. New Jersey was one of the states that were on the front lines of this fight and eventually, won its battle with the federal government.

Reg D Fraud Lawyers Can Help Recover Trillions of Investor Losses

October 31, 2022 | Jenice L. Malecki, Esq.

The Securities and Exchange Commission governs private placements exemption from registration of securities on an exchange that are still sold to the investing public via Regulation D (Reg D). Reg D offerings are attempted by private companies or entrepreneurs because funding is faster at a lower cost than in a heavily reviewed and documented public offering. The problem many investors face are illiquidity, company failure and the end of promised distribution income.

Studies show that in the past 14 years, there have been $20 trillion in Reg D offerings, $7.7 trillion sold by brokers; $4.8 trillion of that has happened since 2016. Reg D Fraud Lawyers in New York at Malecki Law know the losses these investments can cause investors.

Studies estimate that close to 10% of Reg D offerings fail, meaning likely in excess of $5 trillion sold by brokers in the past 6 years may have failed. Approximately one-third of Reg D offerings reportedly fail within the first six years and approximately 25% are sold by high-risk brokerage firms.

Investors Sue Wells Fargo for Failing to Supervise Ex-Broker Who Faces Up to Twenty Years in Prison for Role in $30 Million Cryptocurrency Ponzi Scheme

November 15, 2021 | Malecki Law Team

While the lack of a regulatory framework certainly makes it harder to recover fraudulent cryptocurrency losses than for traditional securities, falling victim to a cryptocurrency scam when investing through a broker or large firm regulated by FINRA or the SEC makes it easier.

This coming January, a federal court in New York’s Southern District is scheduled to sentence former Wells Fargo broker James Seijas up to twenty years in prison for his alleged role in facilitating a $30 million-plus Ponzi scheme. Meanwhile, Seijas’ former firm, Wells Fargo Advisors, has been named in a Florida civil lawsuit brought by 73 affected investors who allege that the firm failed to supervise Mr. Seijas and failed to investigate his business dealings in Q3I LP, a cryptocurrency hedge fund that Mr. Seijas partly owned. The fund was falsely marketed to investors with inflated returns from a cryptocurrency in which the investor money solicited was never even invested in. While approximately $10 million was invested, most of the remainder was allegedly spent elsewhere on lavish cars, yachts, jewelry, and real estate, including a multi-million-dollar Florida home purchased by Mr. Seijas.

As is often the case when Ponzi schemes collapse, the investor money is typically already spent. Fortunately in Ponzi cases that involve large financial firms like Wells Fargo, investors still have legal recourse to sue the employing firms, which have a duty under the securities laws to supervise the activities of their registered employees not only within the firm, but also to disclose and supervise their business activity conducted outside of and away from the firm. According to Mr. Seijas’ BrokerCheck Report, Wells Fargo had not even disclosed Seijas’ outside business activity at Q3I to FINRA, which the plaintiffs in the civil action claim would have uncovered the scheme had Wells Fargo investigated or “done any minimal compliance review.”

Can FINRA Arbitration Claims Be Brought Against a Bank and Its Employees?

June 29, 2020 | Malecki Law Team

Many clients are asking whether FINRA arbitration claims can be brought against a bank and/or its employees for losses sustained in their investment accounts. The answer is yes. There are more than 5,000 commercial banks in the United States. Along with traditional banking services, many of these banks also provide in house “financial advisors.” In order to charge their customers more, these bank branch financial advisors encourage bank customers to invest their savings with them. Now more than ever, bank customers are being pressured into using these services, and their life savings are being invested rather than saved. This can lead to losses in customer accounts, where customers would have been better off keeping their funds in a savings account. Malecki Law’s FINRA arbitration attorneys have handled many cases involving claims where customers lost money investing with a commercial bank financial advisor.

Up until Congress repealed the Glass Steagall act in 1999, commercial banks, banks that take in cash deposits and make loans, could not offer investment services. The Glass Steagall Act separated commercial banks and investments banks and prohibited commercial banks from providing any investment service to its customers. Once the act was repealed, in order to make greater profit, banks took advantage and began offering these services. Although banks often incentivize their customers to use these services, such as offering lower fees or free checking, the bank’s investment services, however, are not free.

Investing funds with a bank is no safer than investing funds through an online or traditional brokerage firm. Customers ordinarily use banks for savings, checking, CDs, and, sometimes, securing a mortgage or other type of loan. These types of accounts are a bank’s specialty and are FDIC insured, meaning that these are vehicles designed to prevent the loss of money in customer accounts. Contrarily, investments are not a bank’s specialty and investing with a bank’s financial advisor, similar to making an investment in an online or traditional brokerage account, comes with risk, often incurring higher fees than an online or traditional brokerage account. Moreover, not only do the investment products offered at banks charge higher fees, but the quality and diversity of investment products is limited, which increases risk to the customer’s investments.