Blog

http://pretisecuritieslitigationarbitration.blogspot.com/

New England Securities Litigation & Arbitration Law 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

  • Update on Securities Arbitration Administered by FINRA This is by no means verbatim, but presents the highlights of a town hall meeting with Rick Berry, Director of FINRA’s Arbitration Services and Manly Ray, Director of FINRA Arbitration’s Southeast Regional Office and the head of FINRA’s Mediation program, and Sam Edwards, President of the Public Investors Arbitration Association.  Has FINRA seen a spike in cases as a result of stock market volatility and the economic downturn?  Not yet.  FINRA expects a 3-6 month lag, or possibly longer as a result of delays... More
  • Maine Securities Administrator Warns of COVID-19-Related Fraudulent Investment Schemes In an April 3, 2020 warning urging investors to be on guard against an anticipated surge of COVID-19 fraudulent investment schemes, the Maine Securities Administrator cautions that scammers will be targeting investors, capitalizing on the double whammey of the recent economic downturn and anxiety about the virus.     Of special concern are get rich quick schemes specifically tied to the threat of COVID-19.  "Bad actors can be expected to develop schemes that falsely purport to raise capital for companies manufacturing surgical masks... More
  • Maine Joins Other States by Requiring Mandatory Reporting of Suspected Financial Exploitation To enhance prompt reporting of financial exploitation to state securities regulators and adult protective services, on April 2, 2019 Maine joined 25 other states by enacting the Act to Protect Vulnerable Adults from Financial Exploitation, Public Law 2019 Ch. 17.  The Act makes broker-dealers and others mandatory reporters of suspected financial exploitation of seniors and vulnerable adults.   The Act is intended to combat financial exploitation of elderly and disabled persons, a not infrequent occurrence.  According to one reputable source as many as 20%... More
  • Unpaid Arbitration Awards: An Unabated Problem Earlier posts highlighted a long-recognized problem in the securities industry: investors who've proven that they were harmed by bad actors  all too often wind up recovering little or nothing even after winning a legal claim.  An analysis of arbitration awards a few years ago revealed that about 25%, nearly $1 out of every $4 awarded to customers in arbitration went unpaid.  There are solutions to the problem, like requiring insurance (as is required to register an automobile), requiring that broker-dealers maintain higher... More
  • Expungement: A Seriously Flawed Process? In 2017, this blog featured a post examining the standard applied to requests by brokers to cleanse (erase) their public records of customer complaints, a process called "expungement," here.  A recently released (October 2019) study by the investor protection foundation run by the Public Investors Arbitration Bar Association (PIABA) reports that the process is “broken” as a result of being “systematically gamed, exploited and abused” by brokers and brokerage firms.    Among the problems found, according to PIABA's study are sham cases seeking... More
  • Lessons From "Arbitration Nation:" an Empirical Study of 40,000+ Consumer Arbitrations A recent study identifies a problem -- "we know little about what actually happens in" arbitration -- and offers a solution: find out what happened in more than 40,000 consumer arbitrations administered by four major arbitration forums over the course of six years.  In the study, "Arbitration Nation: Data from Four Providers," Professors Andra Cann Chandrasekher and David Horton analyzed "40,775 consumer, employment, and medical malpractice arbitrations filed between 2010 and 2016 in four major arbitration administrators: the AAA, Judicial Arbitration... More
  • New Maine Restrictions on Non-Compete Agreements; Bans Restrictive Employment Agreements 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
  • Investing in Private Companies: Opportunities Abound, But So Do Risks 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
  • Public Investors Bar Association Report: Draft Reforms to FINRA Supervision Rules Leave Investors Vulnerable  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
  • FINRA Arbitration Requirements Take Priority over Forum Selection Clause 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
  • FINRA Issues Guidance on Heightened Supervision for Persons with a History of Past Misconduct  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
  • Blockchain, Digital Currencies, and Securities Regulation  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
  • FINRA to Investors: Beware of "Regulator" Impostor Scams 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
  • FINRA Proposes Special Procedure for Simplified Cases 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
  • FINRA 2018 Regulatory and Exam Priorities Released 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

Firm Highlights

News

Eighteen Preti Flaherty Attorneys Selected as Chambers USA Leaders in Their Field

Eighteen Preti Flaherty attorneys and five practice groups have been selected for inclusion in the 2020 Chambers USA Guide to America's Leading Lawyers for Business , the highly regarded directory of leading attorneys and...

Press Coverage

Officer-involved Shootings Video - Maine Behind the Curve on Public Access to Information

More than three months after officers were involved in a fatal shooting of a Minot, Maine, resident, the Androscoggin County Sheriff's Office and the Office of the Attorney General continue to deny requests to...

Press Coverage

As More States Release COVID-19 Cases by Town, Maine Says It Could Take 6 Months

As more states continue to release information on the number and distribution of coronavirus cases, officials from Maine's public health agency claim that making tallies available to the public under the state's Freedom of...

Press Coverage

Maine - Mills Administration Held Secret Meetings on Pandemic with State Lawmakers

Officials in the administration of Governor Mills briefed large groups of Maine legislators privately and without public notice multiple times, in apparent violation of state law. Extended Coverage: Mills administration holds 8 briefings with...

Publication

Open Courts Compendium: First Circuit

Sigmund D. Schutz was invited by the Reporters Committee for Freedom of the Press to author the First Circuit chapter in the  Open Courts Compendium . The Open Courts Compendium  is a general guide to court access issues, with...