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© 2021 Business Trial Group

515 North Flagler Drive., Suite 2125, West Palm Beach, Florida 33401

Author: Attorney Jared Levy

FINRA’s New Rule Limits Brokers From Being Named as Customers’ Beneficiaries

Investor Alerts Attorney Jared Levy November 16, 2020
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FINRA recently adopted a new rule to limit stockbrokers from being named a beneficiary, trustee, or executor by a customer.  The new FINRA Rule 3241 protects investors by requiring all FINRA-member brokerage firms to affirmatively address any situation where a customer appoints a firm’s stockbroker as beneficiary or to another position of trust such as a trustee or executor.  Rule 3241 requires the brokerage firm to affirmatively permit or prohibit the stockbroker from acting in such capacity or receiving a bequest from a customer’s estate.  The Rule takes effect on February 15, 2021.

FINRA has explained that it adopted the new Rule because investment professionals face potential conflicts of interest when they act in positions of trust for a customer.  The conflicts can include a financial advisor benefiting from his or her influence over significant monetary decisions, which may harm the customer.  FINRA also found that senior investors – including those suffering from mental impairments such as dementia – are particularly vulnerable when they appoint their advisor to a position of trust.

Under the new Rule, the brokerage firm must assess the risks created by a customer’s appointment of a registered person to a position of trust.  Some of the risks include: potential conflicts of interest; the customer’s age; the size of any bequest as compared to the size of the customer’s estate; whether the stockbroker has been named as a beneficiary to other customers; and any indications of customer vulnerability or undue influence.

Although Rule 3241 does not prohibit a stockbroker from being named a customer’s beneficiary or receiving a bequest from a customer’s estate, brokerage firms will be required to carefully determine whether to allow it.  Brokerage firms that affirmatively approve of such a relationship must reasonably decide that it does not present a risk of financial exploitation.

If you want to read the new Rule 3241, it can be found here.

At Morgan & Morgan, we are committed to fighting for justice against brokerage firms and investment advisory firms that exploit their customers.  We commend FINRA for passing the new Rule 3241, which hopefully will help protect customers from being taken advantage of by their financial advisors and stockbrokers.

The Business Trial Group at Morgan & Morgan helps investors recover their losses on a contingency basis. We are only paid if we successfully recover money for you.  We have helped investors recover tens of millions of dollars of investment losses.

The Business Trial Group is part of the largest contingency law firm in the nation, with over 700 lawyers and offices nationwide. Contact us at 888-251-2668 today to speak with an experienced securities attorney.

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SEC Awards $114 Million Whistleblower Award

Investor Alerts Attorney Jared Levy October 27, 2020
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The SEC recently announced a $114 million whistleblower award to a person who provided information that resulted in a successful enforcement action. The $114 million award is a record for the whistleblower program by a long shot – it is more than double the next highest award of $50 million made in June 2020.

SEC Chairman Jay Clayton stated:  “Today’s milestone award is a testament to the Commission’s commitment to award whistleblowers who provide the agency with high-quality information. Whistleblowers make important contributions to the enforcement of securities laws and we are committed to getting more money to whistleblowers as quickly and as efficiently as possible.”

Jane Norberg, Chief of the SEC’s Office of the Whistleblower, said: “The actions of the whistleblower awarded today were extraordinary.  After repeatedly reporting concerns internally, and despite personal and professional hardships, the whistleblower alerted the SEC and the other agency of the wrongdoing and provided substantial, ongoing assistance that proved critical to the success of the actions.”

When a whistleblower voluntarily gives the SEC original, timely, and credible information that results in a successful enforcement action, he or she may receive an award under the SEC’s whistleblower program.  Whistleblower awards range from 10 to 30 percent of the sanctions collected from the securities violator.

The SEC has awarded over $675 million to 108 people since announcing its first award in 2012.  These awards are paid from an investor protection fund that is funded solely by penalties and fines that securities laws violators pay to the SEC.

We are here to help tipsters with the whistleblower process. Please contact one of our Business Trial Group attorneys at 888-874-9075 or online if you have information of securities-related fraud that you believe the SEC (or other agencies, like the CFTC) may be interested in prosecuting.

The Business Trial Group is part of the largest contingency law firm in the nation, with more than 700 lawyers and offices nationwide.  We regularly battle against brokerage firms, investment advisory firms, and banks, and have helped investors recover tens of millions of dollars of investment losses.

The Business Trial Group at Morgan & Morgan will never charge hourly fees or expensive retainers.  We are only paid if we successfully recover money for you.

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Business Trial Group Investigates SAExploration Holdings’ Alleged Accounting Fraud

Investor Alerts Attorney Jared Levy October 22, 2020
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Morgan & Morgan’s Business Trial Group and its securities attorneys are investigating an alleged accounting fraud involving Houston-based seismic data company, SAExploration Holdings Inc. (SAE).

The SEC recently charged SAE and several former executives with perpetrating an accounting fraud that inflated SAE’s revenue by about $100 million. The SEC also alleges that the executives stole millions of dollars.

The SEC asserts that beginning in 2015, the four SAE executives – former CEO and Chairman Jeffrey Hastings, former CFO and General Counsel Brent Whiteley, former CEO and COO Brian Beatty, and former VP of Operations Michael Scott – caused SAE to enter into several seismic-data acquisition contracts totaling about $140 million with a purportedly unrelated Alaska company.  According to the SEC, Hastings and Whiteley actually controlled the Alaska company. The SEC alleges that about $100 million of the $140 million contract was improperly recorded as revenue, as the Alaskan company allegedly had no ability to pay.  The SEC claims that the executives made it appear that the Alaskan company was paying SAE for seismic data, when no bona fide payments were made.   The SEC further alleges that the executives also stole about $6 million.  Finally, the SEC alleges that one of the executives misappropriated an additional $4 million through a fraudulent invoice scheme.

SAE issued restated financial statements earlier this year and then declared bankruptcy in August.

The SEC’s complaint charges SAE and the four executives with violating various provisions of the Securities Act of 1933, as well as the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks a permanent injunction against SAE and permanent injunctions, civil penalties, disgorgement, and officer-and-director bars against the four executives.

If you have suffered losses relating to SAE’s alleged accounting fraud, the securities attorneys with Morgan & Morgan’s Business Trial Group are here to help.  Please contact us at 888-874-9075 for a free consultation.

The Business Trial Group at Morgan & Morgan helps investors recover their losses on a contingency basis.  We are only paid if we successfully recover money for you.  We have helped investors recover tens of millions of dollars of investment losses.

The Business Trial Group is part of the largest contingency law firm in the nation, with over 700 lawyers and offices nationwide.

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JPMorgan Chase to Pay $920 Million Penalty for Fraudulent Spoofing Trades

Investor Alerts Attorney Jared Levy October 16, 2020
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JPMorgan Chase & Co. was recently charged for manipulative and deceptive conduct that involved fraudulent spoofing trades in futures markets for U.S. Treasuries and precious metals.

To settle these charges, JPMorgan agreed to pay over $920 million in criminal penalties, restitution, and disgorgement. The firm also agreed to the payment under a three-year deferred prosecution agreement with the U.S. Department of Justice.

As part of this agreement, JPMorgan admitted that for eight years its traders placed purchase and sale orders for U.S. Treasuries products and precious metals but intended to cancel them before execution.  This illegal tactic is known as “spoofing.” The act of spoofing aims to send false price signals and move markets in advantageous directions.

According to Assistant Attorney General Brian C. Rabbitt of the DOJ’s Criminal Division, traders on JP Morgan’s precious metals and U.S. Treasuries desks engaged in separate schemes to defraud other market participants that involved thousands of instances of unlawful trading meant to enhance profits and avoid losses.

“Today’s resolution — which includes a significant criminal monetary penalty, compensation for victims, and requires JP Morgan to disgorge its unlawful gains — reflects the nature and seriousness of the bank’s offenses and represents a milestone in the department’s ongoing efforts to ensure the integrity of public markets critical to our financial system,” Rabbitt said in a statement.

According to the DOJ, JP Morgan allegedly collected profits of more than $170 million from its spoofing practices, while causing more than $300 million in losses for others.

THE BUSINESS TRIAL GROUP PROTECTS INVESTORS

The largest banks and brokerage firms in the U.S. are alleged to have engaged in fraudulent practices that undermine honesty in the markets, yet they continue to operate.  The Business Trial Group is committed to fighting for justice against these firms.  Contact us at 888-874-9075 or online to speak with an experienced securities attorney.

The Business Trial Group’s attorneys work tirelessly to help investors recover their losses on a contingency basis.  This means we are only paid if we successfully recover money for you.  We have helped investors recover tens of millions of dollars of investment losses.

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