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Category Archives: Securities Litigation

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A Recidivist; Here We Go Again

Posted in Broker-Dealer Regulation, Compliance and Supervision, Financial Industry Trends, FINRA Compliance, FINRA CRD, FINRA Enforcement, Securities Litigation

One area of focus for FINRA has been on recidivist registered representatives. A recidivist is an associated person who has repeated rule violations or customer complaints of a specific nature. FINRA has used a risk-based approach in order to be proactive to identify the bad behavior that these undesirable registered representatives tend to display. In… Continue Reading

Who wants to hear about pitfalls in the advisor/broker-client relationship

Posted in Arbitration, Breach of Fiduciary Duty, Compliance and Supervision, Conflicts of Interest, FINRA Compliance, FINRA Enforcement, Registered Representatives, SEC Compliance, Securities Litigation

Ernie Badway and I have prepared a series of podcasts that highlights client-issues and risk avoidance techniques for broker-dealers and investment advisors.  We hope you’ll take a listen.  

Why elder issues are not just about your clients

Posted in Books and Records, Breach of Fiduciary Duty, Broker-Dealer Regulation, Compliance and Supervision, Conflicts of Interest, Cyber-Security, FINRA Compliance, Ponzi Schemes, Registered Representatives, SEC Compliance, SEC Enforcement, Securities Fraud, Securities Litigation

The SEC and FINRA have made it very clear that they are focused on senior customers and elder abuse. Granted, firms must be focused on the elder customers, but, at the same time, must also focus on the fact that many advisors are included in the graying generation. What are firms to do about that?… Continue Reading

Fox’s Frank Razzano Publishes New Securities Article in Securities Regulation Law Journal

Posted in Securities Litigation

Our partner, Frank C. Razzano, has recently published an article, entitled “What Lies Ahead: Halliburton v. Erica P. John Fund, Inc.,” in the Securities Regulation Law Journal (Spring 2015).  It is a great article discussing a recent United Supreme Court decision dealing with class actions.  Kindly let us know if you would like a copy for your review.   

How to avoid being sued 2.0

Posted in Arbitration, Compliance and Supervision, FINRA Compliance, FINRA CRD, Public Customer Arbitrations, Registered Representatives, Securities Litigation

Over the years that I have defended financial advisors and their firms, I have frequently spoken and written about ways to avoid the risk of being sued. I prepared a guidebook a couple of years ago that detailed some common sense approaches to risk avoidance. I have updated that guidebook to take into account new… Continue Reading

What Does The “E” in Email Mean?

Posted in Broker-Dealer Regulation, Cyber-Security, Financial Industry Trends, FINRA Compliance, FINRA CRD, FINRA Enforcement, Securities Litigation

Recent history shows that FINRA is going after brokers who alter client’s records.  This, unfortunately, reminded me of my own bad experience as a young lawyer when defending a broker. That broker had great “contemporaneous” notes of his communications with the client that made the case very defendable.  My opponent questioned the authenticity of these… Continue Reading

Is the SEC that good? SEC Wins Every Administrative Case

Posted in Dodd-Frank, SEC Enforcement, Securities Litigation

In what is sure to add more “fuel to the fire,” it was recently reported that the SEC has won every case brought in its administrative courts over the last year.  The SEC has not been so successful with its federal court cases, winning 61% of those cases over that same period. Of course, regular blog readers know that the… Continue Reading


Posted in Securities Fraud, Securities Litigation

The U.S. Court of Appeals for the Sixth Circuit affirmed a dismissal of investors’ securities claims in the wake of a bank liquidation, but left the door open to a possible “silent fraud” claim under Michigan law.  See Dailey v. Medlock, http://www.bloomberglas.com/public/document/Thomas_Dailey_et_al_v_Lisa_Medlock_et_al_2014_BL_9430_6th_Cir_Jan. A claim for silent fraud under Michigan law requires a plaintiff to establish… Continue Reading

Data breaches and third-party vendors; what do you need to know.

Posted in FINRA Compliance, SEC Compliance, Securities Fraud, Securities Litigation

I recently blogged about the pervasive nature of data breaches and the particular risks presented to this industry.  Many firms may think that they are secure because they used a vendor to build a secure environment, but history tells us that is not the case.  Cyber-attacks do not always come from a direct hit, but… Continue Reading


Posted in Securities Fraud, Securities Litigation

A divided U.S. Court of Appeals for the Second Circuit affirmed the dismissal of securities law antifraud claims against a “trusted” investor in the pump-and-dump scheme perpetrated by two defunct broker-dealers, A.R. Baron & Co. and Bear Stearns Cos. Inc.  See Fezzani v. Bear Stearns & Co. Inc., 2d Cir. No. 09-4414-cv, 5/7/13,  http://op.bna.com/srlr.nsf/r?Open= jkoo-97hryk. … Continue Reading

Former AP of Defunct Firm May Enforce FINRA Arbitration Pact

Posted in Arbitration, Securities Litigation

The California Court of Appeals reversed a lower court’s refusal to compel a dissatisfied investor to arbitrate its dispute with a former associated person of a now defunct FINRA member firm.  See Ronay Family Limited Partnership v. Tweed, Cal. App., D062195, 5/23/13. A FINRA rule rendering a claim against a former member ineligible for arbitration… Continue Reading


Posted in Corporate Governance, Hedge and Private Equity Funds, Securities Litigation

Former shareholders may pursue narrowed claims against some large private equity firms who allegedly conspired with one another minimizing competition for target companies.  See Dahl v. Bain Capital Partners LLC, D. Mass., 07-12388, 3/13/13), http://www.bloomberglaw.com/public/document/Klein_et_a_v_Bain_Capital_Partners_LLC_et_at_Docket_No_107cv1238. The plaintiffs previously held shares in various public companies that were, ultimately, acquired by private equity firms.  The complaint alleged… Continue Reading


Posted in Arbitration, Securities Litigation

The Tennessee Supreme Court ruled that it has subject matter jurisdiction to review a trial court’s order vacating an arbitration award while remanding the dispute to a new arbitration panel without expressly declining to confirm the award.  See Morgan Keegan & Co., Inc. v. Smythe, Tenn. Sup. Ct., No. W2010-01339-SC-R11-CV, (4/25/13); http://op.bna.com/srlr.nsf/r?Open=jkoo-979qp7. The Court interpreted… Continue Reading


Posted in Hedge and Private Equity Funds, Securities Litigation

The U.S. District Court for the District of New Jersey ruled that New Jersey fraud and misrepresentation claims by a venture capital firm over an unsuccessful investment in a telecom concern could proceed. See Edelson V LP v. Encore Networks Inc., D.N.J., Civ. No. 2:11-5802(KM), 5/9/13.  www.blomberglaw.com/public/document/EDELSON_V-LP-v_ENCORE -NETWORKS-INC-et_al_Docket_No_211cv05802_DNJ. The plaintiff made an investment in a… Continue Reading

Did You Know That FINRA Arbitrations Just Got More Expensive

Posted in Arbitration, Intra-Industry Arbitrations, Public Customer Arbitrations, Securities Litigation

Both the industry and customers liked FINRA arbitration because it was a relatively cost effective dispute resolution forum.  With FINRA Notice to Members 13-21 and effectively doing away with having an industry person on the panel, FINRA has just made arbitration more expensive for everyone. Without any industry presence on the panel, both customers and… Continue Reading

So Do You Really Want To Arbitrate Customer Claims

Posted in Arbitration, Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA Enforcement, Public Customer Arbitrations, Securities Litigation

In the 17 plus years of defending broker-dealers in FINRA arbitrations, I and my clients have relied upon the fact that at least one arbitrator would have industry experience.  In my experience, having that presence did not create an unfair advantage for the firm.  Instead, it provided the panel with a knowledgeable resource that would… Continue Reading

Pleading Scienter Seems To Get Harder And Harder

Posted in Securities Litigation

I do not envy any attorney who attempts plead a Section 10b-5 claim.  Courts throughout the country have made pleading scienter extremely difficult, and the benefit of any doubt favors the defendants.  Under the PSLRA, a plaintiff must plead a strong interference of scienter by alleging sufficient facts to show that the defendant had both… Continue Reading

Do You Want To Know One Of The Greatest Risks To Your Practice

Posted in Compliance and Supervision, Public Customer Arbitrations, Registered Representatives, Securities Litigation

In the years that I have defended broker-dealers and investment advisors from customer-initiated complaints, a common theme has emerged.  The bulk of the complaints seem to come from older clients.  Unfortunately, the aging baby boomers may exacerbate this issue. In a recent Investment News article by Mary Beth Franklin, she reported on a recent study reflecting… Continue Reading

Receiver is Unlucky with Clawback Attempt From Charity

Posted in Ponzi Schemes, Securities Litigation

The receiver for a convicted fraudster and his entities will not be able to recover a $2 million donation the fraudster made to a small Minnesota college.  See Kelley v. College of St. Benedict, D. Minn., Civ.;’ No. 12-822 (RHK/LIB), 10/26/12, and http://docs.justia.com/cases/federal/district-courts/minnesota/mndce/0:2012cv00822/125281/34/. The federal district court found that the receiver lacked the ability to bring this action, and… Continue Reading