FINRA Disciplinary Action Report for brokers and brokerage firms for August 2017
The Financial Industry Regulatory Authority (FINRA), the watchdog for the securities industry, operates a Yelp or Angie’s List-style database called BrokerCheck. This powerful resource compiles accreditation, work history, and perhaps most importantly customer dispute history on all 650,000 or so registered financial advisors in this country.
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.
As a recent article in US News & World Report reminded us, investors trying to win back their money after they've been the victimized by investment advisor misconduct are, well, kind of in a rigged game. That's because, whether they know it or not, when investors open an account with a brokerage firm, they most likely are required to sign a mandatory arbitration clause that causes them to waive their constitutional right to a jury trial, and binds them to FINRA's arbitration process instead. As the article's author notes, "So far, efforts to abolish this requirement—which is inherently unfair to investors—have been unavailing. The securities industry is a powerful lobby. The last thing they want is a forum where claims against its members will be judged fairly and impartially."
These mandatory arbitration clauses present a large hurdle for individuals who have been victims of broker misconduct, since arbitrators oftentimes rule in favor of the financial industry and deny the claims of victims entirely. In fact, according to the statistics of FINRA's own website, "Results of Customer Claimant Arbitration Award Cases," over the past 5 years in cases decided by arbitrators, less than 50% saw monetary compensation awarded to Claimants (see table inset.)
nother important point is that investors who need to consult an attorney for a dispute with their financial adviser must be sure to ask any prospective attorney if he or she has experience representing customers in the FINRA arbitration process. The FINRA arbitration process contains many nuances that are unique to itself and not present in a typical commercial litigation lawsuit filed with the court.
Finally, nd in light of the award statistics cited above, it would be doubly wise to retain an attorney who has actually won a FINRA arbitration on behalf of an individual in the past. An attorney with a successful FINRA track record can not only more accurately evaluate the likelihood of winning an award, but he or she will possess the experience to know what it takes to win an award at a final hearing within this complex, opaque, and suspect system that FINRA operates and the securities industry must be grateful for.
If you or anyone you know has been a victim of securities fraud or broker misconduct, please contact us for a free consultation.
A recent lawsuit by San Francisco Giants hurler Barry Zito alleges that his friend used their relationship to mislead Zito into making a $3M investment on a fitness software startup that never materialized. We've seen misrepresentation like this before, and we're pretty sure we'll see it again. Unfortunately, pro athletes with large salaries and limited investment knowledge are highly susceptible to manipulation by stock brokers and friends alike. Precisely because they have a lot of money, they tend to be over-trusting of friends who they believe have their best interests in mind. Not always the case. And it's important to keep in mind that perpetrators of securities fraud are not always stock brokers or financial advisors--they can be anyone who enters upon a securities contract.
f you or someone you know think you've been the victim of securities fraud or misrepresentation, please The Green Firm immediately for a free consultation.