David P. Meyer Shares Insight On Proposed Bill To Ban Mandatory Arbitration Agreements Between Investors And Advisors
Meyer Wilson Partner and President of the Public Investors Advocate Bar Association (PIABA) David P. Meyer was recently quoted by several media outlets for insight into proposed legislation that would prohibit broker-dealers and advisors from making clients sign mandatory arbitration agreements.
The proposed bill, known as the Investor Choice Act, would prohibit any “broker, dealer, funding portal or any municipal securities dealer” from requiring investors to sign mandatory arbitration agreements. It would also void existing arbitration agreements, prohibit advisors and broker-dealers from forcing investors to waive their right to bring class action lawsuits, and prohibit any security from registering with the SEC if its issuer mandated arbitration for client / advisor agreements.
The Investor Choice Act is supported by many who say it’s a needed step in stripping away some of the powerful advantages brokers, dealers, and advisers hold over investors. As Attorney David Meyer tells Financial Advisor magazine:
“Investors should be able to exercise their right to a day in court if they believe that is the best remedy. If arbitration is an appropriate option, investors should have the right to evaluate it as an option after their dispute arises.
Many investors, however, are still likely to choose FINRA arbitration because is often the best option for aggrieved investors to pursue their claims against their broker and brokerage firm. The FINRA arbitration process has improved significantly over the past 20 years. And, if the playing field is leveled by giving investors the choice to pursue arbitration at the time the dispute arises, I firmly believe the FINRA arbitration process will work hard to make the process more fair and transparent.”
Mr. Meyer was also quoted by Wealth Management and InvestmentNews about the bill and its potential impact on the FINRA arbitration process, which he says would need to become more fair in order to attract the cases. “If arbitration is not a monopoly, the process itself will improve.”
“For brokerage firm disputes, it seems clear that many investors would still choose to use FINRA dispute resolution. But the existence of real choice undoubtedly would have the salutary side effect of making the FINRA process fairer, more transparent and more investor friendly. Giving investors the option to also bring claims in court when appropriate would help to ensure that FINRA will continue to improve the arbitration process such that many investors opt to have their cases heard there.”
With decades of experience, our firm has the experience, resources, and tenacity needed to tackle even the largest cases nationwide. Contact us today for a free case evaluation.
Does Securities Arbitration Have A Statute Of Limitations?
What is a Securities Arbitration?
Securities arbitration is a legal process through which disputes between customers (investors) and brokers or brokerage firms are typically resolved through the dispute resolution forum of the Financial Industry Regulatory Authority (FINRA). Arbitration gives customers the option to recover losses from brokerage firms due to investment misconduct without pursuing traditional litigation in court. It is often the only way investors can bring claims against brokers and brokerage firms because of mandatory arbitration clauses that are contained in most investor customer agreements.
When pursuing recovery through arbitration, it’s essential to understand that there is a time limit on when you can file. Here’s what you need to know about securities arbitration and the statute of limitations.
How Long Do I Have to File a Securities Arbitration?
The Code of Arbitration Procedure Rule 12206 for customer disputes states, “No claim shall be eligible for submission to arbitration under the Code where six years have elapsed from the occurrence or event giving rise to the claim.” However, depending on the particulars of a case, the time restriction could be more or less than six years. When it comes to filing a securities arbitration, time is of the essence. To learn if you are eligible to file a securities arbitration, it’s critical to speak to an investor claims lawyer as soon as possible.
Need Assistance Filing a Securities Arbitration? We Can Help.
Suffering financial losses due to your broker's or investment adviser’s negligence is a stressful and frustrating experience. However, help is available, and you may be eligible to recover damages through FINRA arbitration. Our highly experienced investment misconduct lawyers are here to hold financial institutions accountable for bad acts that cost our clients’ their hard-earned savings.
Call Meyer Wilson at (800) 738-1960 or contact us onlineto speak confidentially with an attorney today.
Did You Overpay for Mortgage Bonds?
The SEC has charged Merrill Lynch with misleading customers on mortgage bond prices and overcharging for trades to increase profits.
Mortgage Bond Fraud
The Securities and Exchange Commission (SEC) has ordered Merrill Lynch to pay $15.7 million to settle allegations of securities fraud. According to an SEC investigation, Merrill Lynch traders and salespeople overcharged customers for residential mortgage bond trades between 2009 and 2012. Merrill Lynch RMBS traders lied to bank customers about the actual price they paid for the securities, according to the SEC. Since mortgage bond pricing is not public information and bonds are not publicly traded on an exchange, customers were easily duped by broker-dealers who negotiated the bond transactions.
The SEC investigation revealed that Merrill Lynch RMBS traders lied to customers about mortgage bonds prices and increased the prices to raise their profits on the trades. By deceiving customers with misleading statements and undisclosed, excessive markups on mortgage bond trades, Merrill Lynch acted recklessly according to the SEC. The SEC further alleged that Merrill Lynch RMBS traders charged some customers twice the amount they should have paid. Although Merrill Lynch had policies in place that prohibited traders from making false or misleading statements, they failed to implement the procedures and monitor traders' communications with customers according to the investigation.
The SEC investigation found that Merrill Lynch failed to properly supervise RMBS traders. By doing so, they allowed brokers to participate in mortgage bond trades that violated anti-fraud federal securities laws. As part of the settlement agreement, Merrill Lynch has been ordered to pay more than $10.5 million to customers and a fine of $5.2 million to the SEC for illegal securities fraud actions. Merrill Lynch agreed to the settlement without admitting or denying SEC allegations and issued a statement that they have taken steps to improve in-house procedures to prevent repeated actions.
Stockbrokers and financial advisors have a duty to recommend investments that are appropriate based on their clients' specific circumstances. Unfortunately, many investors are deceived by unethical brokers who put their profits above their clients' best interests. When an investor suffers financial losses due to fraud and investment misconduct, a claim can be filed through an investment fraud attorney. In most cases, claims against brokers are handled through FINRA arbitration.
Every case is different but investors who have been cheated out of their investments due to illegal, fraudulent broker actions can recover damages, which may include their investment principal, expected gains if money had been invested appropriately, arbitration costs, attorney's fees, and punitive damages if egregious misconduct was involved. If you lost money because of broker misconduct, call our investment fraud attorneys at Meyer Wilson today at (800) 738-1960 to schedule a free consultation.
FINRA Issues Warning over Non-Lawyer Arbitration Representatives
The Financial Industry Regulatory Authority (FINRA) recently released a statement warning investors that a number of non-lawyer representatives have exploited customer claimants they represented in FINRA’s arbitration and mediation forum.
FINRA was made aware of this issue after customer claimants made allegations, reporting that their representatives took settlement money they were aware of, were represented without first securing consent from the claimant, and by charging non-refundable deposits totaling as much as $25,000.
FINRA is also concerned that few, if any, of these non-lawyer representatives have malpractice insurance. Addressing these concerns is expected to be one of its top priorities in 2018. It will likely send out a regulatory notice to seek comment on what actions should be taken. Some options on the table include issuing a guidance on what customer claimants should be considering when they hire non-lawyer representatives, or outright barring non-lawyer representatives in arbitration and mediation forums.
While FINRA’s current rules permit non-lawyer representatives, there are certain exceptions when this is not permitted like when the chosen representative is disbarred or currently suspended, barred or suspended from the securities industry, or in cases where state law does not permit a non-lawyer representative.
If you were taken advantage of by a non-lawyer representative, contact the law firm of Meyer Wilson today. Our investment fraud attorneys have spent nearly two decades representing clients throughout the United States, and through our efforts we have recovered more than $350 million in verdicts and settlements. Start out with a free consultation by providing us the details of your case through our online form, or call us at one of our offices today to discuss your case with one of our attorney over the phone.
Energy Investors Continue to Lose Money in 2017; Investors May Be Able to Recover Their Losses in FINRA Arbitration
The law firm of Meyer Wilson has successfully represented numerous investors in recent years who suffered significant losses in energy-related stocks, master limited partnerships (MLPs), and other similar investments. If your stockbroker or financial advisor improperly sold you energy-related investments that lost money, the lawyers at Meyer Wilson might be able to help you recover your losses by filing mandatory arbitration claims with the Financial Industry Regulatory Authority (FINRA).
Over the years, many investors were talked into buying energy-related stocks and MLPs by their financial advisor because of the attractive dividends that these investments often paid. Since energy markets declined dramatically in 2015, however, these investments lost significant amounts of money both in terms of decreased dividend payouts and loss of principal.
Many of our clients have been retirees who bought these investments because of the income that these investments promised. In some cases these investments no longer pay any dividends and the principal value of the investment has lost 50 percent or more.
We have seen many instances where investors’ portfolios were over-concentrated in energy stocks such as MLPs, meaning that too much of their portfolio was invested in these stocks. Under securities industry rules, it may be unsuitable for a stockbroker to recommend that an investor over-concentrate their portfolio in a single stock or sector, like energy.
We have also seen numerous instances where financial advisors plainly misrepresented various facts about these investments and sold them as though they posed little risk to investors. In reality, as many investors have learned, MLPs and energy stocks can be incredibly risky and volatile and subject to significant risk of loss.
During the first half of 2017, some of the worst performing S&P 500 stocks continued to be energy stocks and MLPs. These include shares of Transocean Ltd. (RIG), down 44.17%; Anadarko Petroleum (APC), down 34.98%; Range Resources (RR), down 32.57%; Marathon Oil Corporation (MRO), down 31.54%; Cimarex Energy (XEC), down 30.82%; Devon Energy (DVN), down 30%; Helmerich Payne (HP), down 29.79%; Newfield Exploration (NFX), down 29.73%; Hess Corporation (HES), down 29.57%; Chesapeake Energy (CHK), down 29.20%; and Noble Energy Inc. (NBL).
Since the energy markets declined in 2015, many investors have been assured by their financial advisors that these investments will rebound. In many cases investors have been lulled by their brokers into not taking any legal action and simply hoping for the best. Energy stocks nevertheless still have not recovered overall, and investors continue to contact our office inquiring about their legal options.
If you lost money in energy stocks sold to you by your financial advisor, contact the lawyers at Meyer Wilson today to discuss your legal options. Under the law, nearly all customer disputes against brokerage firms must be brought in FINRA arbitration. The lawyers at Meyer Wilson have represented over a thousand investors in FINRA arbitrations and recovered millions of dollars on behalf of their clients.
Broker James Edward Lyons Accused of Unauthorized Trading
Former Raymond James broker, James Edward Lyons, was discharged from Raymond James after client allegations of unauthorized trading in April of 2017.
James Lyons, who is not currently registered, has been accused of unauthorized trading most recently, but also has several other customer complaints in the past. Before working at Raymond James starting in 2013, James Lyons worked at Morgan Keegan & Company in Shreveport, Louisiana.
What is Unauthorized Trading?
“Unauthorized trading” occurs when a broker does not obtain authorization from their client before conducting trades in a customer account. Brokers who do not obtain authorization breach their ethical obligations and violate federal and state laws and rules and regulations of the securities industry. You can read more about unauthorized trading on our blog.
If you have lost money through unauthorized trading, an experienced investment attorney can help you recover. Call the attorneys at Meyer Wilson for a free and confidential case evaluation.
Former Broker Donald A. DeVito II Accused of Churning and Unauthorized Trading
Donald A. DeVito II, a former Wells Fargo stockbroker, has been accused of churning and unsuitability in a recent customer complaint filed in May 2017.
Regulatory documents show that Donald DeVito was terminated from Wells Fargo in late 2016 because of “concerns related to the level of trading in accounts.” He is not currently registered with any investment firm.
Mr. DeVito has previously been the subject of at least five other customer complaints that ultimately settled. The combined settlement amounts for the five previous complaints total approximately $600,000.
Churning is Illegal
When a broker engages in excessive trading to generate commissions, they breach their obligation to put their client’s interests first. This “churning” of investments is against the law and cost clients additional fees that can eat away at their money.
Sometimes brokers and firms claim that clients agree to excessive trading because they have indicated they have an “aggressive” risk tolerance. However, if the main goal of the broker or firm is to generate fees through excessive buying and selling of stock, it is churning.
How to Spot Churning
Evidence of churning can be found in investor accounts. It can include brokers selling well-performing stocks while keeping low-performing stocks in their client portfolios. It looks like the investment portfolio is doing well because of the selling, but in reality, the broker is charging fees and filling the portfolio with low-performing stocks.
Claude Darrell Mcdougal Gets 6+ Years for Securities Fraud
Claude Darrell McDougal was sentenced to 78 months in prison after pleading guilty to orchestrating a Ponzi scheme that defrauded more than 25 investors out of approximately $2.5 million.
According to court documents, McDougal solicited investments in the form of promissory notes through something called “US Financial Alliance Consultants, LLC,” a company that McDougal created in 2005. It was alleged that the promissory notes issued by the company were not properly registered to be sold in any state, and McDougal was not registered to sell securities.
In order to induce investors, McDougal was accused of promisingthat investors would receive guaranteed fixed rates of returns on their investment between 6-15% each year.
The complaint explained that many of McDougal’s victims were elderly, and some of them lost their entire life savings investing in McDougal’s Ponzi scheme.
Instead of investing the money as promised, McDougal used some of the money to issue “payouts” to other investors and used about $1.19 million to fund a lavish lifestyle, including dinners, jewelry, and hotels, among other things.
For more information on how you can guard against Ponzi schemes or scams targeting the elderly, visit some of our helpful resources:
J.P. Morgan Securities Ordered to Pay $485,000 to Clients
J.P. Morgan Securities, LLC ("J.P. Morgan") was recently ordered by a three-person arbitration panel to pay two of its clients $485,000 in damages. The clients filed an arbitration against the brokerage firm and registered representative Robert Owen Klein in January 2012 for losses they suffered as a result of an investment strategy that involved short selling treasury bonds.
According to a recent article in Bank Investment Consultant, Klein invested around 40 percent of the clients' assets in these short treasury positions betting that the interest rates would rise. Unfortunately, the concentrated investments lost the clients more than $1 million. Selling the bonds short caused additional damages because it put the clients at risk of margin calls, which wouldn't have been the case if the positions had been held long. When the market moved against the short bets, Klein was forced to close the positions, resulting in substantial losses.
According to Klein's BrokerCheck report, available through the FINRA website, he has already been the subject of three customer complaints revolving around similar claims of misconduct, beginning in fall of 2011. He also has six additional complaints that are still pending, all involving investments in government debt.
One of the claims asserted against J.P Morgan in this case was failure to supervise. Under FINRA Rule 3010, brokerage firms owe their customers a duty to use reasonable care in the supervision of its agents. The rule provides that "each member shall establish and maintain a system to supervise the activities of each registered representative, registered principal, and other associated person that is reasonable designed to achieve compliance with applicable securities laws and regulations."
Failure to supervise claims can include the failure to monitor, review, and investigate red flags in its due diligence efforts, as well as in the handling of clients' investments.
Major Blow to Transparency Efforts of SEC Oversight of FINRA Arbitration
The U.S. Court of Appeals for the District of Columbia Circuit recently affirmed a trial court's order denying an investors' rights group's Freedom of Information Act request for certain documents relating to the Securities & Exchange Commission's (SEC) oversight of Wall Street's mandatory arbitration program.
At issue was a request by the Public Investors Arbitration Bar Association (PIABA), a nationwide organization of attorneys who represents investors in securities arbitration disputes, for documents relating to the SEC's oversight of the arbitration program administered by the Financial Industry Regulatory Authority (FINRA). FINRA is a self-regulatory organization funded by Wall Street and charged with regulating brokerage firms. The SEC oversees and examines FINRA.
In 2011, PIABA submitted a FOIA request to the SEC for documents relating to the SEC's audits, inspections, and reviews of FINRA's arbitration program, in particular documents relating to how arbitrators are selected by FINRA to hear customer disputes. The SEC denied the request, contending that the documents constituted "examination reports" that were exempt from disclosure under FOIA.
PIABA filed suit in U.S. District Court against the SEC seeking to compel disclosure of the requested records. The district court ultimately ruled in favor of the SEC.
By affirming the district court's ruling, the D.C. Circuit Court struck a major blow to efforts to bring some transparency to the SEC's oversight of FINRA's arbitration program.
Investors are forced into the arbitration process when signing agreements to open their brokerage accounts. Under that process, FINRA randomly selects potential arbitrators who are then reviewed and scored by the parties.
At a minimum, investors should be able to know how FINRA randomly selects arbitrators to hear their cases.
Unfortunately for investors, pending further court review, that process will remain shrouded in secrecy.