The day after Christmas, FINRA issued a press release announcing that five big firms – Citigroup, J.P. Morgan Chase, LPL, Morgan Stanley and Merrill Lynch – had each entered into a settlement, collectively agreeing to pay a $1.4 million fine.  Their offense?  They each violated FINRA’s supervisory rules because for a number of years, dating

My partner, Heidi VonderHeide, has busied herself these last few months learning everything she can about Reg BI.  Happily, here is her post on the subject, and it doesn’t predict gloom and doom in the new year as that regulation is implemented.  – Alan

Just before the Holidays, I attended FINRA’s one-day Reg BI seminar

This post is about Reg BI, but if you really want to learn about it, as opposed simply to listening to me gripe, I urge you to register for the webcast that my partners Heidi VonderHeide and Rob Betman will present on Wednesday, December 11, 2019, at 2:00 PM EST.  It is just one of

In December, Ulmer & Berne is hosting four financial services webcasts, the first of which I will be presenting along with my partner, Michael Gross:  FINRA 2019: A Look Back, and Thoughts About What Lies Ahead (Wednesday, December 04, 2019, 2:00 PM EST).  The others are The Anatomy of a Whistleblower Action: Procedure, Practice Pointers

In the past week, I ran across two discrete instances in which FINRA acts as a secret gatekeeper of sorts, exercising its own subjective judgment, without anyone knowing what, exactly, it is doing or why, employing unarticulated standards, and without providing any avenue for redress.  And I find that really frightening.

The first involves CRD,

I was catching up on my reading and came across a column in Investment News by Mark Schoeff  that described the results of a recent FINRA arbitration, results which I found a bit alarming.  I caution you: reading too much into any arbitration award can be dangerous and/or foolhardy since they don’t always follow – or, occasionally, even slightly resemble – the rule of law.  Indeed, screwy arbitration awards abound, and sometimes all you can say is dang, glad it wasn’t me.  That’s why, in the eyes of the law, anyway, arbitration awards, even those that are well reasoned and sensible, do not constitute binding legal precedent.

Nevertheless, this award serves as a nice cautionary tale for firms that are willing to open accounts for advisory customers but not serve as the actual advisor, which is an altogether common practice in the securities industry.  Remember: investment advisors can recommend securities transactions, but they cannot actually effect any trades.  To make a securities trade that was recommended by an IA, the customer must have a securities account at some broker-dealer.  Some advisors are dually registered, and work for a BD, and that’s where the account is generally opened.  Many other advisors, however, are not associated with a BD, so their advisory clients need a brokerage account somewhere.  Often, that somewhere is a discount BD that charges low commissions, like TD Ameritrade, the respondent in this particular arbitration.
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