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Whistleblower Tips, Recoveries on the Rise

By Michael Petro -- Buffalo Law Journal Statutory enactments by federal financial regulatory and various state enforcement agencies have made it easier, safer and financially enticing for employees and former employees to report corporate wrongdoing. According to the U.S. Securities and Exchange Committee, whistleblower tips have been on the increase over the past few years as legislation has provided whistleblowers incentives to report fraud to the Securities and Exchange Commission and Commodity Futures Trading Commission and give protection against retaliation and disclosure of their identities. The SEC, using the whistleblower program developed after the recession in 2010 under the Dodd-Frank Act, has...

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Biz Group Loses Stay Bid In DOL Fiduciary Rule Challenge

By Y. Peter Kang of Law360.com A D.C. federal judge on Wednesday denied a renewed request by a financial services industry group to block the U.S. Department of Labor’s rule expanding the definition of a fiduciary for retirement account investment advisers, saying the court had already determined the DOL's interpretation was reasonable. U.S. District Judge Randolph D. Moss denied the National Association for Fixed Annuities’ bid for a preliminary injunction blocking enactment of the rule while the group appeals his earlier ruling that rejected their case on the merits, saying NAFA isn’t likely to win the appeal. Having already determined that the DOL’s...

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FINRA Fines Ameriprise For Missing Fraudulent Transfers

By Carmen Germaine of Law360.com Ameriprise Financial Services Inc. agreed Wednesday to pay a fine to settle the Financial Industry Regulatory Authority’s claims it failed to catch and stop a sales assistant who was siphoning cash from his relatives’ accounts, even though the firm had just improved its supervisory systems after a similar failure. Without admitting or denying FINRA’s allegations, Ameriprise agreed to pay an $850,000 fine to end claims its supervisory system failed to detect a sales assistant and office manager who had converted hundreds of thousands of dollars from five Ameriprise accounts owned by his relatives and domestic partner. FINRA’s...

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DOL Gets First Victory In Fiduciary Rule Challenges

By Y. Peter Kang of Law360.com The U.S. Department of Labor’s so-called fiduciary rule for retirement account investment advisers was promulgated after an adequate analysis and within the agency’s authority, a D.C. federal judge ruled Friday, giving the government its first victory in one of many challenges to the new rule. U.S. District Judge Randolph D. Moss said the DOL’s modification of the definition of who is considered a fiduciary — and therefore on the hook for any breach of fiduciary duty — was made within its statutory authority and was promulgated via a satisfactory rule-making and notification process. The judge shot...

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Government’s Willful Blindness Theories Put Lawyers At Risk

By Melissa Maleske of Law360.com The government's recent focus on holding individuals accountable for corporate misdeeds is supporting the rise of aggressive theories of prosecution, including the idea that even absent actual knowledge, they should have known something was amiss — and defense experts say that's an especially dangerous development for attorneys. Willful blindness is a boon to prosecutors, a theory that allows them to bring cases even where lawyers can show they had no actual knowledge that they were involved in misconduct. "In a world where second-guessing has become a blood sport, lawyers can be exposed," says Lawrence Spiegel, a partner at...

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State regulators reveal top enforcement targets and the price they pay

Agencies brought more cases against registered advisers than unregistered entities, and certain products featured in many of them By Mark Schoeff Jr. of investmentnews.com For the first time since they've been keeping enforcement statistics, state regulators last year brought more cases against registered financial advisers than against unregistered entities. In its 2015 enforcement report, the North American Securities Administrators Association said 812 registered advisers were named as respondents in cases, compared to 791 unregistered individuals and firms. Overall, state regulators opened 4,487 investigations last year and took 2,074 enforcement actions, according to the report, which was released at the NASAA annual conference in...

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SEC Wants Firms To Watch Reps With Troubled Pasts

By Carmen Germaine of Law360.com The U.S. Securities and Exchange Commission announced Monday that it is launching exams to test the compliance oversight and controls of investment advisers that hire individuals with a disciplinary history. The SEC’s Office of Compliance Inspections and Examinations released a risk alert Monday saying the office’s staff will soon start conducting examinations of investment advisers registered with the SEC that employ or contract with individuals who have a history of disciplinary events in order to assess how firms supervise higher-risk individuals. “Such individuals may present an increased risk of future misconduct, and thus can present harm to clients,”...

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2 Firms To Pay SEC Fines Over Wrap Fee Compliance Failures

By Carmen Germaine of Law360.com James & Associates and Robert W. Baird & Co. agreed Thursday to pay a fine to the U.S. Securities and Exchange Commission over claims they failed to ensure clients enrolled in programs with a single annual fee weren’t being overcharged commissions for certain trades. The two firms both agreed to pay civil penalties without admitting or denying the SEC’s allegations that they failed to ensure clients in their “wrap fee” programs, who are charged a single annual fee for bundled investment advisory and trade execution services, weren’t being charged unsuitable commissions on trades made with broker-dealers outside...

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SEC Says Advisers Must Report Clients’ Derivatives Risk

By Jody Godoy of Law360.com Law360, New York (August 25, 2016, 5:11 PM ET) -- The U.S. Securities and Exchange Commission said on Thursday investment advisers must disclose more about assets held in separately managed accounts, including their level of exposure to derivatives, cementing rules industry stakeholders previously worried could expose trading strategies. The regulator announced final changes to a reporting form called Form ADV requiring advisers to report aggregate data on SMAs, including their exposure to derivatives and borrowings, and on other aspects of the advisers' businesses. The SEC also tightened certain record-keeping requirements under the Investment Advisers Act. Advisers will have...

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Finra fines UBS $250,000 for overcharging mutual-fund customers

The firm allegedly failed to provide about 2,700 customers waivers tied to upfront sale charges InvestmentNews.com By Christine Idzelis A unit of UBS Group AG will pay a $250,000 fine to settle charges that it failed to waive certain fees for eligible mutual-fund customers, according to the Financial Industry Regulatory Authority Inc. The brokerage firm charged customers an excess of $277,636 to invest in mutual funds from September 2009 to June 2013, according to a settlement notice that Finra accepted Monday. The alleged supervisory failures were tied to so-called reinstatement rights that allow investors to avoid front-end sales charges. “We are pleased to have resolved...

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