New England Securities Litigation & Arbitration Blog

Preti Flaherty's Financial Services Group offers the full range of dispute resolution services when it comes to financial advisors, broker-dealers, registered investment advisors, banks, insurers, and other financial institutions, including FINRA arbitration, regulatory enforcement actions, and litigation in state and federal courts.

Recent Blog Posts

  • A new Maine law will make it more difficult for Maine employers to enforce non-compete agreements, an issue of particular interest in the securities industry where non-competition agreements often have been used to deter brokers from changing jobs. In enacting the new legislation, Maine joins other New England states, including Rhode Island, Massachusetts, and New Hampshire, which also have new laws on the books limiting the enforceability of non-compete agreements.On June 28, 2019, Governor Mills signed LD 733 (“An Act... More
  • More retail investors than ever are investing in private companies, but doing so can be "high-risk" and "more opaque" and private companies tend to be a magnet for fraud, according to the Wall Street Journal.  "More opaque" means "more secretive"--subject to lesser regulatory oversight and fewer obligations to disclose to the public how their business is performing.  Also problematic is that it can be hard to sell investments in private companies, which means that buying private companies can "tie up... More
  • In a report titled, FINRA’s Attempt to Gut Investor Protections: Proposed Reforms to FINRA Supervision Rules, Public Investors Arbitration Bar Association (PIABA) argues, “FINRA is currently contemplating the evisceration of crucial protections that have been in place for decades to safeguard investors against investment schemes by brokerage firms’ registered representatives, including ‘selling away’ schemes. If FINRA’s proposed changes are approved, there will likely be more investment scams perpetrated by registered representatives. If these proposals are adopted, brokerage firms will no... More
  • The Third Circuit Court of Appeals recently ruled that Bear Stearns must comply with the Financial Industry Regulatory Authority (FINRA) rules that require arbitration of a customer’s claims despite the existence of a forum selection clause. That ruling, in Reading Health System v. Bear Stearns & Co., n/k/a J.P. Morgan Securities, LLC, involved a broker-dealer agreement between Bear Stearns (now J.P. Morgan Securities) and Reading Health System regarding offerings of certain securities by Reading Health through which J.P. Morgan Securities... More
  • To reiterate the supervisory obligations of FINRA member firms regarding associated persons with a history of past misconduct that may pose a risk to investors, FINRA recently published Regulatory Notice 18-15. FINRA Rule 3110 (Supervision) requires member firms to establish and maintain systems to supervise activities of associated persons to comply with applicable securities laws and FINRA rules. Member firms have a fundamental obligation to implement a supervisory system that is tailored to the member firm’s business and addresses the... More
  • As with any new investment product or asset class, cryptocurrencies and related blockchain technology have been the subject of a great deal of investor interest and regulatory activity, particularly as bad actors have exploited public interest to peddle unsuitable investments or--even worse--perpetrate frauds.A blockchain is a public, distributed ledger that is replicated and hosted on numerous computers, creating thousands of identical digital copies that give the system credibility and oversight needed to create a secure public list of an asset.  That list... More
  • The Financial Industry Regulatory Authority (FINRA) recently issued an Investor Alert, warning investors to beware of financial scammers posing as regulators.Gerri Walsh, FINRA’s Senior Vice President for Investor Education warns, “Financial fraudsters go to great lengths to appear legitimate, making it difficult for investors to recognize their ruses.” “That’s why we are telling investors flat out that FINRA does not guarantee investments, and our officers play no role in facilitating investment opportunities. We want people to know that and to understand... More
  • The Financial Industry Regulatory Authority (FINRA) proposes to amend the Code of Arbitration Procedure for Customer Disputes and the Code of Arbitration Procedure for Industry Disputes to include a Special Proceeding for Simplified Arbitration. FINRA claims involving $50,000 or less would benefit by having an additional, intermediate form of adjudication that would provide the chance to argue cases before an arbitrator in a shorter, limited telephone hearing format. The Special Proceeding would be limited to two hearing sessions. The highlights: A Special... More
  • The Financial Industry Regulatory Authority (FINRA) recently released its 2018 Regulatory and Examination Priorities Letter (the “Priorities Letter”), highlighting topics FINRA will focus on in 2018.FINRA regulates brokerage firms doing business with the public in the United States. FINRA writes rules; examines for and enforces compliance with FINRA rules and federal securities laws; registers broker-dealer personnel and offers them education and training; and informs the investing public. FINRA provides surveillance and other regulatory services for equities and options markets, as... More
  • Through Financial Industry Regulatory Authority (FINRA) Regulatory Notice 17-42, FINRA proposes establishing a roster of arbitrators with certain training, backgrounds, or experience to handle requests to expunge customer dispute information. These arbitrators would decide expungement requests where the underlying customer-initiated arbitration is not resolved on the merits (e.g., settled) or the associated person files a separate claim requesting expungement of customer dispute information. FINRA also proposes additional changes to the expungement process, such as changes to the timeframe in which... More
  • As reported in InvestmentNews, the Public Investors Arbitration Bar Association (PIABA) issued a report asserting that certain “public governors” on the Financial Industry Regulatory Authority’s (FINRA) 24-person board serve on too many corporate boards and/or have connections to Wall Street such that they cannot represent the publicly effectively and face conflicts of interest.FINRA is a self-regulatory organization which oversees thousands of broker-dealers on behalf of the Securities and Exchange Commission (SEC). It has 13 public governors, 10 industry governors and... More
  • On September 26, 2017, the North American Securities Administrators Association (NASAA) released its annual Enforcement Report. The report is available on the NASAA website at its Enforcement Report, NASAA reported that state securities regulators conducted 4,341 investigations in 2016, and took 2,017 enforcement actions overall. These actions led to more than $231 million in restitution returned to investors, fines of $682 million and criminal relief of 1,346 years (incarceration and probation).For the second consecutive year, NASAA reported that its... More
  • A previous post discusses the high standard necessary to expunge a customer complaint from a broker's record, here.  A recent Maine case demonstrates how that standard can be met.  In an unfortunate family dispute, Ferland v. Ferland, Docket No. CV-15-292 (Aug. 2, 2017), the claimant alleged that she had loaned about $721,408 to her son (a stockbroker a/k/a registered representative), which remained unpaid, and that the broker sold her an unsuitable annuity.  The broker denied all of the allegations.  The parties... More
  • FINRA arbitrators—neutral, qualified individuals—serve as decision makers, weigh the facts of each case presented and render a final and binding decision. Arbitrators have long been classified as “public” or “non-public.” Public arbitrators are individuals who are not required to have knowledge of the securities industry, but often do. Non-public arbitrators are individuals who have worked in the financial industry or regularly provide services to brokers, broker-dealers, their customers, and others in the financial industry.  But the line-drawing exercise delineating who... More
  • What are the rules of the road with regard to broker requests to expunge customer claims from their records?  This post surveys the current standards for applicable to broker requests to remove customer complaints from their records (i.e., the Central Registration Depository or "CRD").  According to FINRA, the CRD system is "the central licensing and registration system for the U.S. securities industry and its regulators. The system contains the registration records of more than 3,790 registered broker-dealers, and the qualification,... More