Morgan Stanley Loses Appeal of $3.3 Million Finra Arbitration Award

According to InvestmentNews, a federal judge denied Morgan Stanley’s motion last week to appeal a $3.3 million FINRA arbitration award it lost to investors in Puerto Rican bonds.  The award included a $3 million sanction against Morgan Stanley for purposefully concealing evidence in a hearing, which Morgan Stanley argued was excessive.  The court’s decision denying Morgan Stanley’s request makes clear that even if the sanction was excessive, that’s not a basis for overturning an arbitration award.

So when can arbitration awards be changed or overturned by reviewing courts?

The general rule is that arbitration hearings are a one-shot deal.  A reviewing court cannot look into the facts of the case or the merits of the decision – its only job is to determine whether the arbitrator was fair and the final decision is valid.  A high standard of deference is given to the arbitrator’s decision, and only in very rare instances will an arbitration award be disturbed by a reviewing court.  Any ability to change or vacate an arbitration award is governed by the each state’s arbitration acts and the Federal Arbitration Act.

These statutes were primarily written to allow courts to enforce arbitration agreements.  In some cases, it is necessary for one of the parties to take the arbitration award and submit it to a court of law for confirmation, making it a legally enforceable judgment.  This is sometimes just part of the process and does not mean that the arbitration award is under review.

The bottom line is that even if it is clear that an arbitrator completely missed the boat, unless a losing party can prove fraud or a conflict of interest, that losing party is typically bound by the arbitration award.

If you have any questions about investment losses, FINRA arbitration & awards contact an experienced securities arbitration lawyer at Meyer Wilson.

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.

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Congress Votes in the Middle of the Night to Give Big Banks Immunity from Lawsuits

The Senate voted 51-50 on Tuesday, October 24 to repeal a rule put in place by the Consumer Financial Protection Bureau (CFPB) that banned mandatory arbitration clauses in certain financial contracts.

All 48 Democrats, along with Republicans Lindsey Graham and John Kennedy, voted against the resolution. Vice President Mike Pence cast the tie-breaking vote late Tuesday night, allowing big banks to enjoy absolute immunity from customer lawsuits of any kind. This is a huge win for Wall Street lobbyists. There is now no incentive to prevent abuses such as the Equifax data scandal or Wells Fargo's opening up millions of fraudulent accounts without customers' permission.

In order to overturn this rule released in July of this year, Senate Republicans used the Congressional Review Act, a seldom-used legislative process that allows lawmakers to overturn recently finalized rules with a simple majority vote, rather than the typical 60 votes.

"Tonight's vote is a giant setback for every consumer in this country," Richard Cordray, the head of the Consumer Financial Protection Bureau said in a statement. "Wall Street won and ordinary people lost. Companies like Wells Fargo and Equifax remain free to break the law without fear of legal blowback from their customers."

The House of Representatives already voted to overturn this rule back in July, so now it will make its way to the president’s desk for his signature.

"This bill is a giant wet kiss to Wall Street," said Senator Elizabeth Warren on the Senate floor Tuesday night as she defended maintaining the rule. "Bank lobbyists are crawling all over this place, begging Congress to vote and make it easier for them to cheat consumers."

Not only does this vote remove this consumer protection, it prevents the CFPB from introducing a “substantially similar” rule in the future without congressional action.

“If there's no forced arbitration clause in your contract, you have a choice. You can go to court or if your bank offers it you can pursue arbitration... Chances are pretty good that if the bank charged you an unauthorized $30 fee that there are other customers in the same boat and that means if you want you can join a class action lawsuit against the bank for free," said Warren. "A class action gives you a chance to get some money back."

Our securities fraud and class action attorneys at Meyer Wilson have dedicated their careers to protecting people targeted by fraudsters and taken advantage of by banks, financial advisers and brokerage firms. As bills that affect consumers are introduced and signed into law, we work hard to create new plans of action that will continue to help our clients secure the maximum recovery possible, and this new repeal won’t change our commitment to that. If you were the victim of a scam or fraudulent scheme by a broker for financial institution, call us at one of our office locations today or send us your information to request a free case evaluation.

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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.

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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.

Contact our law firm today to learn more about your legal options and rights as an investor.

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FINRA Pushes along Proposals to Crack down on Unpaid Arbitration Awards and High-Risk Brokers

The board of the Financial Industry Regulatory Authority (FINRA) recently moved to increase disclosures from firms and brokers that fail to pay arbitration awards and to strengthen the sanctions they place on brokers with disciplinary histories and the firms that hired them.

These proposals will allow for the restriction of firm and broker activity while cases are on appeal, allow for increased penalties against brokers with certain infractions, and require firms to increase their supervision when a broker appeals a hearing decision or while a disqualification request is under review.

A separate proposal will require firms to publically disclose whether or not conversations between customers and their brokers need to be recorded because a significant percentage of their brokers previously worked at disciplined firms. The challenge of dealing with brokers who are repeatedly disciplined has been a longstanding issue for the regulatory body, but FINRA hopes these changes can help them push back.

"These actions will build on FINRA’s extensive existing programs to address high-risk brokers and reflect our commitment to protect investors and promote public confidence in securities firms and markets," FINRA president and chief executive Robert Cook said in a statement.

FINRA also proposed that customers have the ability to withdraw their arbitration case when a broker or firm becomes inactive while their case is pending and refile it in court.

At Meyer Wilson, our securities fraud attorneys are committed to fighting for the rights of fraud victims across the United States. If you lost money investing with a broker, call us today to discuss your case with a member of our firm, or fill out our online form to request a free consultation.

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The SEC Just Released an Investor Bulletin Explaining the FINRA Arbitration Processes Involved in a Dispute With Your Stockbroker

On December, 20, 2016, the SEC’s Office of Investor Education and Advocacy issued a bulletin explaining the process involved when a customer of a brokerage firm has a dispute with the firm.

The bulletin explained that if you’re involved in a dispute in the securities industry, it will generally be handled through arbitration rather than through litigation since most brokerage firm account opening agreements include a provision that requires both parties to agree to binding arbitration if a dispute ever comes up.

The following is a summary of the SEC’s bulletin to provide you with some basic information about what to expect during your arbitration case. We also invite you to explore the many articles,informational videos and blogs on our website to learn more about the FINRA arbitration process and how our lawyers may be able to help you recover losses suffered as a result of stockbroker misconduct.

How FINRA Arbitration Differs from a Lawsuit

While both offer a final and legally binding conclusion to a dispute, they have a few key differences, including:

Simplified Arbitration

For claims valued either at or below $50,000, they will be subject to the rules that govern simplified arbitrations in the FINRA forum. However, no hearings will be held in simplified arbitrations unless the customer requests a hearing – if a hearing isn’t requested, then the arbitrator will review a written description of the facts and relevant documents submitted by the parties involved. This process is generally a far cheaper alternative because none of the parties need to travel to attend a hearing or appear in person to answer questions or give testimony.

How Arbitrators Are Selected

For claims valued at or under $50,000, a single arbitrator will hear the case. In claims valued between $50,000 and $100,000, a single arbitrator will hear the case unless all parties give written approval to have the case heard by a panel made up of three arbitrators. In claims valued over $100,000 or where a party requests non-monetary damages or an unspecified sum of money, the panel will consist of three arbitrators unless all parties give written approval to have the case heard by a single arbitrator.

In most cases, a single arbitrator panel will consist of a public arbitrator – someone completely unaffiliated with the securities industry, both through professional services performed on behalf of the industry and through their employment – unless all parties give written approval to have the case heard by a non-public arbitrator. All parties involved will submit a list of potential arbitrators ranked in order of preference. The final choice and initial list of options will be decided and provided by FINRA’s Director of Arbitration.

For three-arbitrator panels, FINRA’s Director of Arbitration will provide the parties involved with three lists: public arbitrators who are eligible to act as the panel’s chairperson, a list of non-public arbitrators and a list of public arbitrators. The parties will then rank their choices in order of preference or completely strike a name from the list. The final panel will consist of two public arbitrators and one non-public arbitrator, unless all non-public names have been stricken – in that case, all three will be public arbitrators. If the parties’ lists aren’t submitted on time, then FINRA’s Director of Arbitration will assume that they have no preference and compile the panel from all available names.

The Arbitration Process

During the discovery process, the parties will exchange all relevant documents and gather the necessary information to prepare for an evidentiary hearing where the arbitrators and parties meet in person to present witness testimony, arguments and any evidence they have to support their case. At any point during this process, the parties can choose to settle their dispute even after this process begins.

Once the settlement is complete, broker-dealers are not allowed to restrict or prohibit an individual from communicating with any securities regulators, including FINRA and the Securities Exchange Commission (SEC) using the confidentiality provisions included in a settlement agreement. If the broker-dealer attempts to use a document like discovery stipulations in arbitration proceedings or confidentiality provisions in settlement agreements to restrict or prohibit anyone from communicating with these regulators, then FINRA may charge that broker-dealer with violating FINRA Rule 2010.

If a settlement cannot be reached, the arbitration panel will issue an award, usually within 30 days after the conclusion of the hearing. In cases where there’s a three-arbitrator panel, a majority of the arbitrators must agree on the award. Unless all parties request a written explanation for the award at least 20 days before the beginning of the arbitration hearing, no written explanation will be provided following the conclusion of the case.

FINRA Dispute Resolution

Most arbitration claims that involve customers are filed with FINRA’s Office of Dispute Resolution.

The Cost of Arbitration

The initial filing fee for a customer filing a complaint is generally between $225 and $4,000 depending on the amount in dispute, though the Director of Arbitration has the ability to defer part of or all of the filing fee if the customer can show suitable financial hardship. The fees for hearing sessions will be calculated based on the number of arbitrators and on the amount in dispute, and it is up to the arbitrators to determine how much of the fee each party is responsible for. The parties involved may also be responsible for other fees including administrative costs, explained decision fees, contested subpoena fees, discovery motion fees and adjournment fees.

At Meyer Wilson, our investment fraud attorneys have spent nearly two decades representing clients across the nation in order to provide them with the experienced legal representation they need to recover their lost funds. Fill out our online form to give us the details of your situation in a free case evaluation, or give us a call at one of our four office locations to speak with a member of our firm today. We handle all cases on a contingency fee basis, so you won’t owe any legal fees until we’re successfully recovered your losses.

How to Get Your Money Back if You Invested With Michael Oppenheim

Last week, we reported that former JP Morgan Broker Michael Oppenheim of New York had been charged with stealing $20 million from his clients. According to the U.S. Securities and Exchange Commission, Oppenheim (CRD# 3021013) maintained his scheme from 2011 until October 2014, telling his clients that their money was going toward safe municipal bonds, all the while putting their money into his own brokerage accounts, which he then lost after participating in risky options trading.

Any investor who loses money through their broker/financial advisor’s fraud or misconduct does have the opportunity to fight for their money back, but they must do so through a process known as FINRA arbitration. Stockbroker misconduct claims are handled through FINRA arbitration, rather than before a judge or jury, because most contracts between brokers and their clients contain a provision outlining the details of how disputes must be handled.

There are actually many benefits to handling a stockbroker misconduct claim through arbitration, including:

Meyer Wilson, a law firm dedicated to representing investors in FINRA Arbitration, is currently investigating charges against Michael J. Oppenheim, formerly of JP Morgan, that he stole millions of his clients’ investment dollars. If Oppenheim was your broker at any point from 2011 to October 2014, we invite you to contact us today for a free evaluation of your case.

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.

Who is a FINRA Arbitrator and What Difference Does the Arbitrator Selection Process Make?

Absolutely. Everyone – based on his or her profession, experiences, and politics – has some built in bias about court cases and financial disputes. Which is why, as reported by Reuters, the Financial Industry Regulatory Authority is actively recruiting new arbitrators. According to Barbara Brady, FINRA's lead recruiter of arbitrators, the self-regulatory organization hopes that new arbitrators will add “more cultural and professional diversity to its pool [of arbitrators].” Based on recent FINRA actions and statements (such as the launch of the organization’s newest pilot program), FINRA’s train of thought seems to be that the fairness of the arbitration process is directly correlated to how much choice investors have over who their arbitrators are. But, is that assumption correct?

Arbitrators for a FINRA panel are picked similarly to how a traditional jury is selected during a trial. Before the hearing begins, a list of potential arbitrators, picked randomly from FINRA’s arbitrator pool, is handed to each party.

The list contains the potential arbitrators’ names and any associated disclosure reports, which include information about the arbitrators’ industry experience. Parties involved in the dispute can then strike any name from the list and rank the remaining choices according to their preference.

Prior to Feb. 2011, investors involved in a dispute that involved sums of more than $100,000 were required to have at least one industry-affiliated arbitrator on their three-person panel. This requirement was often – rightly – perceived as having the potential to introduce a significant conflict of interest into the process. After all, could someone who may be a colleague of the broker or brokerage firm involved in the dispute treat the investor’s claim with the unbiased regard it deserves?

Many investors and investor advocates didn’t think so.

In fact, 61% of investors surveyed in 2008 said the FINRA arbitration process was inherently unfair to investors.

So, when FINRA introduced a pilot program in 2010 that allowed investors to choose all-public arbitration panels instead, a significant number jumped at the chance.

That same year, investors were awarded damages in a higher percentage of cases than any other year over the past six years. (In 2007, for example, investors were awarded damages in only 37% of cases. By 2010, investors were receiving awards in 47% of cases heard before a FINRA arbitration panel.) The number of multi-million dollar awards also increased that year. Investors quickly associated the all-public panel option with the increase in investor awards, and the pilot program was adopted permanently by early 2011.If the number and size of investor awards are any indication, then it does seem – based on recent years’ data – that as investors are given more choices and control over the arbitration process, they are treated more fairly. With that in mind, it seems highly likely that a larger and more diverse arbitrator pool, which would further expand investor choice, would also lead to a fairer and more balanced process.