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FINRA Panel Denies J.P. Morgan Request for Injunction

By George C. Miller of Shustak Reynolds & Partners, P.C. posted on Friday, January 3, 2020.

A FINRA arbitration panel has denied J.P. Morgan Securities’ request for a permanent injunction preventing its former broker, Eric Weiss, from contacting clients with whom he worked at the firm. Weiss left J.P. Morgan for Raymond James earlier in 2019. Soon after he resigned, J.P. Morgan sued in Indiana federal court seeking an emergency temporary restraining order (TRO) barring Weiss from contacting clients until FINRA’s arbitration division conducted a full hearing on the dispute. [...] Read More

FINRA Panel Awards Over $11 Million to Defamed Former UBS Employee

By Kara Siegel of Shustak Reynolds & Partners, P.C. posted on Thursday, December 19, 2019.

Last week, a panel of FINRA arbitrators ordered UBS Financial Services Inc. to pay over $11 million to a former supervisor, including $7.5 million in punitive damages, for defaming him on his Form U5 and thus preventing him from obtaining alternative employment. Mark Munizzi worked as market-operations supervisor in UBS’s Chicago office. In February 2018, the market dropped sharply, and two accounts Munizzi oversaw lost significant value. UBS fired Munizzi in April of that year. UBS asserted that Munizzi had failed to respond to a notification of margin calls on the two accounts; Munizzi said he was provided no such notification. UBS also said that Munizzi had failed to properly supervise the risks of an uncovered options strategy and lied during an internal review of the incident. [...] Read More

FINRA Panel Upends TRO Against Former Broker

By Kara Siegel of Shustak Reynolds & Partners, P.C. posted on Friday, December 13, 2019.

Last week, a FINRA arbitration panel took the extraordinary step of ordering the parties to an arbitration to request dissolution of a temporary restraining order (TRO) imposed by a district judge in Nevada. On November 12, 2019, Edward Jones had secured a TRO and injunction preventing former broker Mike Peterson from contacting his former clients. Edward Jones argued that after running the company’s Henderson, Nevada office for 13 years, Peterson had decamped for rival Ameriprise, contacted at least 11 former customers using Edward Jones’s confidential client data, and sent transfer paperwork to at least 15 former customers. [...] Read More

What is Regulation Best Interest (Reg BI)?

By George C. Miller of Shustak Reynolds & Partners, P.C. posted on Friday, December 6, 2019.

In June 2019, the SEC adopted a new rule under the Securities and Exchange Act of 1934 requiring broker-dealers and their representatives to act solely in the “best interest” of their retail clients when making investment recommendations. The so-called “Regulation Best Interest,” or “Reg BI” imposes a new standard of conduct on broker-dealers and their registered representatives beyond the existing suitability obligations and, according to the SEC, will align the expected standard of conduct with retail customers’ reasonable expectation that the financial professionals with whom they work will, in fact, act in their best interest. [...] Read More

Mutation of the Bankruptcy Preference Claim into the Wrongful Payor Claim

By James J. Reynolds of Shustak Reynolds & Partners, P.C. posted on Wednesday, November 20, 2019.

Anyone who has been through it remains dumbfounded. Those about to experience it are sure to become flabbergasted. I am talking about a bankruptcy trustee’s ability to claw-back your hard-earned money because you were paid by the “wrong payor.” Some of you may be aware of a bankruptcy “preference claim” which occurs when one of your customers files for bankruptcy and the bankruptcy trustee seeks to force you to give back any payments from your customer during the 90 days preceding the bankruptcy, i.e. the Preferential Transfer ( 11 USC 547). The principal underlying “preference claims” is that all creditors should be treated equally and payments to any particular creditor made within 90 days of the bankruptcy is considered unfair, unless a valid defense is available, to the other creditors who may not have received any payment. This concern over financial abuse goes back to England’s Elizabethan era and the unscrupulous insolvent person giving away their money to friends or relatives rather than true creditors. [...] Read More

Investment Fraud Continues to Plague USCIS EB-5 Program

By George C. Miller of Shustak Reynolds & Partners, P.C. posted on Monday, November 18, 2019.

The SEC recently announced a series of new enforcement actions against EB-5 regional centers participating in the U.S. Citizenship and Immigration Services (USCIS) EB-5 Immigrant Investor Program. The EB-5 program allows certain foreign nationals to invest funds in the U.S. through USCIS-approved “regional centers.” If, after two years, those investors can demonstrate their investments are generating jobs in the United States, they may be approved for permanent residency status. With the high and growing demand for permanent U.S. residency and the rapid expansion of wealth in Asia and elsewhere around the world comes the perfect opportunity for bad actors to commit fraud. [...] Read More

J.P. Morgan, Schwab Pursue Claims Against Departed Advisors

By George C. Miller of Shustak Reynolds & Partners, P.C. posted on Friday, November 8, 2019.

Another week, and two more temporary restraining orders have been sought against advisors departing J.P. Morgan Securities and Charles Schwab. On Tuesday, a Florida judge issued a TRO barring transitioning financial advisor Justin Barroso from contacting clients after joining a UBS Wealth Management office in Fort Lauderdale, Florida. J.P. Morgan alleged Barroso, who reportedly managed $184 million in client assets at J.P. Morgan, aggressively solicited “at least 8” clients after joining UBS in alleged violation of her J.P. Morgan employment agreements [...] Read More

LPL to Debut Employee Financial Advisor Channel

By George C. Miller of Shustak Reynolds & Partners, P.C. posted on Wednesday, October 2, 2019.

What was old is new once again. LPL Financial, the nation’s largest independent broker-dealer, recently announced plans to debut a new “employee-based” advisor channel. As part of the roll-out, the firm acquired Florida-based Allen & Co., which has 30 financial advisors and approximately $3 billion in assets under management. [...] Read More

What is FINRA? Part 2 – What Does FINRA Do?

By Jonah A. Toleno of Shustak Reynolds & Partners, P.C. posted on Friday, September 6, 2019.

In Part 1 of this blog series, we established that FINRA (the Financial Industry Regulatory Authority), formerly known as the National Association of Securities Dealers (NASD), is a self-regulated organization (“SRO”) that engages in multiple functions in the financial services and securities industry. Our firm represents entities and individuals in varying capacities before FINRA. [...] Read More

Woodbridge CEO Pleads Guilty to $1.3 Billion Fraud

By George C. Miller of Shustak Reynolds & Partners, P.C. posted on Wednesday, August 14, 2019.

Robert Shapiro, the ex-CEO of the Woodbridge Companies, has pled guilty to orchestrating a $1.3 billion fraud impacting more than 7,000 investors across the country, according to prosecutors in Miami. According to a statement prepared by his lawyer, “Shapiro has taken personal responsibility for the failure of Woodbridge. [...] Read More