Caution with Complex Investments

By  Scott Evans, Spring 2014 Student Intern

cautionIn previous blog posts, interns here at the Investor Advocacy Clinic have explained various types of investments such as stocks, bonds, and more.  While these provide a helpful roadmap for investors, modern investments often take far more complex forms.  These investments can be difficult for both experienced and novice investors to comprehend.  While it might be tempting to place trust in your investment professional that such complex investments are appropriate for your profile, investors should not shirk from doing their own homework. Continue reading

Investor Advocacy Clinic Comment Highlights Importance of Protecting Investors’ Confidential Information

The  Investor Advocacy Clinic is dedicated to protecting investors’ interests. One way in which we accomplish this is by closely monitoring rule changes that may affect individual investors.

FINRA periodically revises its arbitration rules to update or improve the arbitration process. Before any new rules or changes to rules may be adopted, the proposed rule is provided to the public for comment. Comments are reviewed and taken into consideration when deciding whether to modify an existing rule or adopt/reject a new rule. As such, the Investor Advocacy Clinic endeavors to participate in this critical process to protect investors.

The Proposal: SR-FINRA-2014-008

FINRA proposal SR-FINRA-2014-008 suggests changes to how confidential investor information is handled in certain aspects of arbitration proceedings. The changes include requiring parties to redact or remove parts of personal identifiers, such as social security numbers, and gives investors thirty days to correct redaction mistakes and resubmit properly redacted versions.

The Clinic’s Comment

On March 14, 2014, the clinic submitted its comment on the proposed rule change. Overall, the clinic expressed support for the proposal’s goal, but recommended broadening the rule to cover more confidential information in every situation where investors’ confidential information is being exchanged. Federal courts have similar rules requiring the redaction of sensitive information and the proposed rule change seeks to move FINRA proceedings in the same direction, though the clinic noted the FINRA proposal could go further, mirroring the protections available in federal courts. The clinic feels our proposed additions will better protect investors’ personal information.

Protecting investor information is important to the clinic, and we will continue to submit comments to other rules that impact investor interests.

The primary student author, Natalya Nemtseva, was assisted by student interns Timothy Guilmette and Thomas Abrahamson in drafting the clinic’s comment.

Friday’s Fraud: Prepare for Your Future by Learning from the Past

By Benjamin Stubbs, Spring 2014 Student Intern

watchIt’s often been said that those who are unaware of the past are doomed to repeat it.  Earlier this year, the North American Securities Administrators Association (NASAA) posted a “list of the 2013 top 10 financial products and practices that threaten to trap unwary investors and small business owners.”  Over the next ten weeks, I will blog on each of the threats that NASAA identified, in a new series called Fraud Fridays.  Because many of last year’s threats will most likely hang around for 2014, stay tuned so you can learn to recognize and avoid them.  It’s our hope here at the Investor Advocacy Clinic that we can save you from the doom of repeating others’ past mistakes so that you’ll enjoy a future of safe and successful investing.

Expungement under FINRA Rules: What is Expungement?

By Dylan Donley, Spring 2014 Graduate Research Assistant

If you are anything like me, when you first hear the term “expungement,” brokers and brokerage firms are not the first things that pop into your head. More likely than not, you think of having some form of criminal charge wiped clean from your criminal record (not that I know anything about that from experience). Under FINRA rules, brokers are able to seek “expungement” of customer disputes that appear on their FINRA public records if they meet certain requirements set forth under the rules.

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Investor Advocacy Clinic Comments on FINRA Proposed Rule Change 2014-005

study2By Scott Evans, Spring 2014 Student Intern

At the Investor Advocacy Clinic, our goal is to protect investors, particularly those with smaller claims and limited assets. While that sometimes involves participation in FINRA arbitration proceedings, we also further that goal by monitoring proposed rule changes that FINRA is considering. When FINRA proposes to modify its rules, those proposals are open to the public for comments. The comments are taken into consideration when deciding whether to accept, reject, or modify the proposal. As such, the Clinic views these opportunities as a meaningful way to protect the interests of investors.

The Proposal: SR-FINRA-2014-005

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Decoding Your Account Statement: Red Flags

By Scott Evans, Spring 2014 Student Intern

red flag

Investors should be on the lookout for some red flags when examining their account statements.  If found, they should ask their investment professional for an explanation as they might indicate that fraudulent activity is occurring.

Included among these red flags are the following:

  • Statement periods are not set out at even intervals.
  • Account information doesn’t match previous statements for no apparent reason.
  • Contact information for the broker or firm is incorrect.  A similar red flag is if the phone number provided is disconnected.
  • Unauthorized, unexpected, or excessive account activity.  For example, be wary of churning.
  • Excessive or unexpected fees charged to the account.
  • Portfolio breakdown does not match expectations.

Once again, investors should seek an explanation clarifying any suspicious activity apparent from the account statement by reaching out to their investment professional, and this should be done as soon as a red flag is noticed.  Perhaps an honest mistake or typo occurred which the investment professional can clear up.  In the event that the professional cannot provide an adequate explanation or the investor suspects the adviser is acting improperly, the investor should first seek clarification from his investment professional’s firm.  Most large brokerage firms will have a branch manager that supervises individual brokers and a compliance department designed for such oversight.  In the event that this does not rectify the situation, an investor should consider consulting an attorney as soon as possible.  For investors that qualify, the Investor Advocacy Clinic may be able to help out.  More information is available here.


            Account statements are vital to investors as they provide an overview of the account’s progress while also detailing recent activity.  Importantly, they provide a means for investors to ensure their goals are being met, that they understand their investments, and no fraudulent activity is occurring in the account.  Because of this, it is of paramount importance that investors keep themselves informed about the status of their investments by reading every account statement sent to them.

Decoding Your Account Statement: What is an Account Statement?

By Scott Evans, Spring 2014 Student Intern

$Account statements are the primary means by which investors monitor their investment accounts.  Investors should review these regularly.  Like all of us, investment professionals can make mistakes, and account statements are an easy way to monitor for them.  Account statements also help investors keep an eye out for potential wrongdoing.  Continue reading