New York Securities Fraud Lawyers Blog

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.

Is a “Chip-Wreck” on the Horizon?

August 6, 2024 | Jacqueline Candella

Is another tech-based market crash impending? Are the “FANG” stocks in your best interest?

Tech-based stocks have been facing volatility lately as artificial intelligence (AI) and chip related issues arise. For example, NVDA (Nvidia) dropped over 7% yesterday and META (META Platforms) dropped nearly 3.4%. As for 2024 to date, four big FANG names have been on a downward trend – META, AMZN (Amazon.com), NFLX (Netflix), and GOOGL (Alphabet). Is your portfolio overconcentrated in FANG stocks? Are you “chip-wrecked”? Were these investment recommendations made in your best interest given your goals and needs? If you incurred substantial losses, you may have a case. You need to contact a Tech Stock law firm, like Malecki Law in New York, to review your situation.

Yesterday, on August 5, 2024, financial markets faced a crash worldwide, partially stemming from Japan’s Topix and Nikkei plummeting, 24% and 12% respectively. Yesterday was the worst day in the markets for Japan since the year 1987, this may be derived from the Bank of Japan increasing interest rates under 0.1% to 0.25% just last week, the greatest it has been in over fifteen years. The United States markets had a reactionary slide, including the S&P 500, which dropped 3% in just one day, this was the worst drop since September 2022. However, the S&P is still up nearly 9% for the year, to date. Global financial news should be followed carefully as Japan, China, South Korea, and Taiwan are some of the countries that manufacture most of the chips.

Malecki Law Obtains Second Favorable Industry Expungement Award In As Many Months

July 29, 2024 | Malecki Law Team

On July 29, 2024, a FINRA Arbitration Panel issued a favorable award to a former registered representative of a broker-dealer represented by Malecki Law, Malecki Law’s second favorable expungement award of the 2024 Summer. The securities industry has increasingly become a “one strike, you’re out” sector, but retaining experienced Expungement Counsel, like Malecki Law, can help financial professionals correct the record when a previous employer misrepresents the circumstances of their employment termination.

Whenever a registered financial professional is terminated or otherwise transitions away from employment with a FINRA member firm, such member firm is obligated to file a Form U5 with FINRA containing mandatory disclosures about such termination or transition. Firms are obligated to file a Form U5 within 30 days after a registered representative is terminated from the firm. The information disclosed on a Form U5 is typically available to the public via BrokerCheck, but registered representatives are seldom given the opportunity to review or comment on Form U5 language before filing. If false or defamatory information is included on a registered representative’s Form U5, the registered representative’s only recourse is to file an arbitration claim for expungement with FINRA.

Malecki Law’s recent expungement award relates to a registered representative who was terminated for allegedly violating a firm’s and FINRA’s outside business activity policy. The registered representative was a dedicated, diligent employee, who routinely went out of their way to do right by their firm. Eventually, the registered representative received an employment offer from a company in the field in which they had always dreamt of working. The registered representative accepted the offer and submitted their resignation to their FINRA member firm, indicating that they were moving to a firm outside of the securities industry. Rather than accept the resignation, the member firm asked the registered representative to remain at the firm for an additional two months to aid in the transition. After receiving approval from their new company, the registered representative agreed to stay at the firm in a limited capacity to help with the transition for a substantial cut in their pay. If false, misleading, or defamatory language has been filed on your Form U5, you should consult a seasoned Securities Arbitration Attorney, like the ones at Malecki Law in New York City, to see if you have a viable expungement claim.

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.

Supreme Court Strips Securities and Exchange Commission of Its “Home-Field” Advantage

July 8, 2024 | Adam G. Schreck

In a major blow to the Securities and Exchange Commission (SEC), the Supreme Court ruled in SEC v. Jarkesy that defendants against whom the SEC seeks civil penalties for securities fraud are entitled to jury trials under the Seventh Amendment, rather than adjudication through the SEC’s “in-house” administrative law judges. While only time will tell just how impactful the Jarkesy decision will be, this ruling has the potential to dramatically reshape the SEC’s enforcement efforts as we know them today.

Following the Great Recession in 2008, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dobb-Frank), which authorized the SEC to impose civil penalties on defendants through in-house proceedings before administrative law judges or even SEC Commissioners themselves. With this built-in advantage, the SEC’s “win-rate,” as well as its ability to force defendants into unfavorable settlements, rose considerably. In essence, the SEC was authorized to serve as “judge,” “jury,” and “executioner.” If you are the target of an SEC civil action, you should consult an experienced SEC Defense Attorney, like the ones at Malecki Law.

The Jarkesy decision stripped the SEC of this “multi-role” position and relegated the SEC’s civil actions back into federal court, where the SEC was forced to fight its battles for much of its history. In or around 2010, the SEC began investigating Geroge Jarkesy, Jr. (Jarkesy) and his firm, Patriot28, LLC (Patriot28), for suspected securities fraud in connection to two investment funds that Jarkesy managed. The SEC’s enforcement action alleged that Jarkesy and Patriot28 defrauded investors through various misrepresentations and omissions. The case was initially adjudicated by an administrative law judge who submitted an initial decision in 2014. In 2020, the SEC issued its final order against Jarkesy and Patriot28, levying a $300,000 civil penalty against the defendants, disgorging profits earned by Patriot28 and barring Jarkesy from the securities industry.

Defamatory Form U5 Language Deters Investment Firms from Hiring Registered Representatives – Malecki Law Obtained a Favorable Award

June 21, 2024 | Malecki Law Team

The securities industry has become known for its “one strike and you’re out” mentality around Form U4 and U5 “marks” resulting from termination and customer complaints. FINRA Rule 4111 makes firms report employee U4/U5 “mark” statistics firmwide and formerly “explainable” situations are now acting like bars to employment in the industry. Unfortunately, this means that even good, honest registered representatives can face prejudice purely because of erroneous documentation, or defamatory language, particularly from former employers. If you are a registered representative that has faced unnecessary hardship because of false documentation or defamatory language from an employer, you should contact a securities law attorney, like the lawyers at Malecki Law in New York, to review your case.

The Form U5 is a form that contains mandatory disclosures, which discloses why a registered representative leaves an investment firm. The Form U5 is available to prospective firm employers, and certain U5 disclosures must also be posted on BrokerCheck, which is publicly available. Investment firm employers generally review the Form U5 of prospective employees meticulously, especially the “Reason for Termination” section. Language used by a former employer in this section, however minor, may have a significant impact on the future employer’s hiring decision. There have been 195 defamatory FINRA cases in 2023; 104 of which, were Form U5-based disputes.

Malecki Law recently obtained a favorable FINRA arbitration award in an intra-industry matter, O’Keefe v. UBS Financial Services, Inc. Malecki Law’s attorneys Jacqueline Candella, and Adam Schreck represented Claimant registered representative O’Keefe. Associates Candella and Schreck tried the case at an in-person hearing in New York City. O’Keefe requested that his Form U5 be amended to reflect his voluntary termination from his previous employer, and to expunge the false and misleading “Termination Explanation.” The Chairperson granted Claimant’s request, explaining that the expungement was, “based on the incorrect and defamatory nature of the information,” written on the Form U5. If you were faced with a similar Form U5 issue, you should consult with FINRA experts, like the lawyers at Malecki Law in New York.

Recognizing World Elder Abuse Awareness Day: Why You Should Stay Vigilant Regarding Trustees and Power of Attorneys

June 14, 2024 | Malecki Law Team

June 15 is recognized as World Elder Abuse Awareness Day. It was initiated by The International Network for the Prevention of Elder Abuse and is recognized by the United Nations. Elder abuse is defined as any act or neglect where there is an expectation of trust, which causes harm to an older person. Harm can be physical or mental, but it can also be financial, especially if there is a designated trustee or power of attorney, who takes advantage of the elderly. If you, or someone you know was, or may have been the subject of any type of financial elder abuse, you should consult with a knowledgeable securities fraud lawyer, like the lawyers at Malecki Law in New York.

Unfortunately, 60% of abusers are family members, and between 1-2 million people over the age of 65 were victims of elder abuse by someone they depended on for care. Aside from the tangible repercussions that affect the elderly and their families, it is also greatly immoral.

A power of attorney (POA) is a common, yet important legal instrument that designates a person to oversee someone’s personal and financial affairs by acting as their agent. POAs are common among elderly people, who become the principal of the POA, and must be of sound mind when executing the POA. It is a way to relieve the stress of handling their affairs by themselves, or to prepare for any future debilitating disorders, such as dementia. The agent is usually a person that the principal trusts to handle their affairs fairly, and with their best interest in mind. If you suspect that an elderly family member was not of sound mind when executing a POA, or if there was any foul play in handling your elderly family member’s financial affairs, you should speak with an investor protection attorney, like the lawyers at Malecki Law in New York.

“Roaring Kitty” Brought Back to Life: How the “Meme Stock” Leader Continues to Make Headlines Following E*Trade’s Apparent Freeze

June 8, 2024 | Malecki Law Team

What might have been a coincidental system glitch of an apparent freeze of E*Trade’s trading platform on May 13, 2024 following Keith Gill’s reappearance on social media, may have been intentional. Read more about the May 13 event, here. The Wall Street Journal reported on June 3, 2024, about internal discussions to ban Mr. Gill, famously known as “Roaring Kitty” online, from its platform to allegedly prevent market manipulation. If you have ever been locked out of your online brokerage platform, or ever received notice of an apparent ban, you should consult an Investor Protection law firm in New York, like Malecki Law.

Following Mr. Gill’s screenshot posted online this past weekend of his apparent portfolio, GameStop shares rose 21% in the morning of June 3, 2024. The screenshot displayed 5 million shares of GameStop worth nearly $116 million, with 120,000 call options purchased for $5.68 each, with a strike price of $20, expiring on June 21, 2024. Therefore, if Mr. Gill exercises the options, it will leave him with 17 million shares, making him the fourth biggest GameStop shareholder.

In 2021, Mr. Gill appeared at congressional hearings regarding gamifying stock trading and “meme stocks,” while Mr. Gill faced class action lawsuits. Currently, the recent uptick received backlash from other investors, including large GameStop short seller Citron Research. There are even discussions that Mr. Gill is not acting alone, as Citron points out that Mr. Gill’s alleged finances do not support his recent trade. If your broker recommended that you invest in meme stocks against your best interest, you should contact an expert FINRA lawyer, like the lawyers at Malecki Law in New York.

After Nearly 4 Years of Regulation Best Interest, Broker-Dealer Efforts to Consider Reasonably Available Alternatives for their Retail Clients Remain Lacking

May 24, 2024 | Adam G. Schreck

Regulation Best Interest (Reg BI), which was instituted in June 2020, dramatically changed the relationship between broker-dealers and retail investors. Prior to Reg BI, broker-dealers owed a duty to investors to only recommend securities that the broker-dealer believed to be “suitable” for a particular investor based on such investor’s investment profile. Reg BI was implemented to replace the “suitability” standard and to impart on stockbrokers a duty owed to investors that was more analogous to the fiduciary duties owed to clients of financial advisors. Reg BI is made up of four core obligations, including a Disclosure Obligation, a Care Obligation, a Conflict of Interest Obligation, and a Compliance Obligation. If your stockbroker sold you investments that were not in your best interests or in line with your investment profile, you should contact a knowledgeable Securities Fraud Lawyer, like the lawyers at Malecki Law in New York, to determine whether you have a case.

Within Reg BI’s Care Obligation is a seemingly disregarded requirement on broker-dealers to consider “reasonably available alternatives” (RAAs) when making recommendations to retail customers. This requirement applies to recommendations of investments, account types, and even investment strategies made by a broker to their retail investor client. The RAA requirement is encompassed by a broker-dealer’s obligation to “have a reasonable basis to believe that the recommendation is in the best interest of a particular retail customer based on that retail customer’s investment profile and the risks, rewards, and costs associated with the recommendation…”

For a stockbroker to believe that a particular recommendation is in the best interest of an investor, logically the stockbroker must consider other available products that might be able to achieve the investor’s goals with less risk and/or costs. The SEC has described the RAA requirement as a “key component” in achieving compliance with Reg BI’s Care Obligation. If you have experienced investment losses from products recommended by your stockbroker and your broker failed to consider reasonably available alternatives, you should consult a Regulation Best Interest law firm, like Malecki Law in NYC.