financial adviser

SEC May Pack More Heat Soon

A bipartisan effort in Congress is underway to give the SEC more sting when it comes to securities law violators. All we can say is: it's about time! Lawmakers are pushing hard to increase the limits of the fines the SEC is allowed to slap broker dealers and brokerages with to up to $1 million per violation for individual brokers and up to $10 million per offense for firms. Basically, the bill's backers in Congress want the SEC to be able to inflict enough financial pain on brokerages to change the culture. Right now, most firms tend to view the SEC fines as a nuisance--the cost of doing business. If, however, the bill that was written by Senator Jack Reed, a Democrat from Rhode Island and Chairman of the Senate Banking Subcommittee on Securities, Insurance and Investment; and Senator Charles Grassley, a Republican from Iowa and ranking member of the Senate Judiciary Committee gets passed in Congress, the SEC will be getting some serious new regulatory firepower.

Ultimately, what lawmakers hope is that steeper penalties and more pain will result in fewer repeat offenders along with heightened self-regulation on the part of brokerages, who will be forced to beef up or wake up their compliance departments and come down much harder on rogue brokers. Under the new law, not only would broker dealers be more likely to increase vigilance around compliance issues, they would also be much less tolerant of individual broker misconduct. Since heftier fines means broker dealers are more exposed by any bad brokers they sponsor, they'd be foolish not to crack down on rule breakers and/or terminate those who cannot toe the regulatory line. 

Some critics of the bill say that rather than raising its punitive powers lawmakers should be looking to strengthen the SEC's enforcement abilities by granting the commission more funding for personnel and financial expertise. But just last year, the SEC set a record for enforcement actions and fines. Still others say the SEC is most effective on moral terms: they insist that suffering an SEC action is usually a career-ending event. Still, the larger fines written into the bill seem directed more at the brokerages than the individual brokers. By setting their sights on crooked firms, lawmakers have made it clear they want not just to punish offenders and inflict pain, but instigate real change.

It's hard to predict how far the bill will get in Congress before the current session ends in December. But we at The Green Firm hope change comes sooner rather than later.

As always, if you or anyone you know has been the victim of broker misconduct, please contact us for a free consultation.



This Investment Is a Slam Dunk--Not.

Ordinary investors aren't the only ones who get fleeced by rogue brokers, financial scam artists, and Ponzi schemers. It also happens--quite a bit actually--to professional athletes. Just because a pro ball player is wealthy and successful thanks to athletic prowess does not mean they're a sophisticated investor. That goes for wealthy and successful people in general. In other words, and even if arbitrators and juries don't always see it this way, wealth does not equal sophistication when it comes to investments and financial products. Time and again, we have seen NBA, NHL, and MLB players targeted by false friends or fraudsters who take advantage of a pro athlete's bank account or good will. A recent piece we came across on Financial Advisor strums the same sad chord. 

In this case, FINRA (Financial Industry Regulatory Authority) put the kibosh on the activities of Success Trade Securities nd its CEO and founder, Fuad Ahmed, for fraudulent behavior in the sale of $18 million in promissory notes to 58 investors. Many of these investors were pro athletes. It's highly likely that these athletes invested in Success Trade at the behest of their brokers, who apparently didn't think to look more closely at the suspiciously high rates of interest the notes promised, nor at the legitimacy of the underlying business and its owner. What the brokers were looking at, we're pretty darn sure, was the prospect of making a quick buck off their baller clients. According to the report, the Success Trade notes "promised to pay an annual interest rate of 12.5 percent on a monthly basis over three years and some promised interest as high as 26 percent." Red flag, right there. As we've said before and we'll say again, if it sounds too good to be true... Case in point, Ahmed continued to raise funds to meet his goal of $5 million long after he'd already collected the $5 million. Plus, he gave himself "loans" and paid off new investors with previous investors' money (a Ponzi scheme in the making). Whether you're a pro athlete or an ordinary investor, don't let a broker or huckster sell you a piece of bright blue sky and or get funny with your money...

But if they do, and you become a victim of financial adviser misconduct or any other form of investment fraud, contact us for a free consultation. We may not be able to dunk a basketball, but we know how produce results when it comes to securities litigation.