Investor Advocacy Clinic Comments on FINRA Special Notice on FinTech

On October 10, 2018, student interns Ben Dell’Orto, Matthew Haan, Kevin Mathis and Lynn Mckeel filed a comment letter with FINRA on behalf of the Investor Advocacy Clinic concerning a FINRA Special Notice seeking comment on the consumer impact of technological advances in the financial services industry.

The clinic’s comment, available in full here, recommends that the promise of data aggregation and artificial intelligence be balanced with guidance, supervision, and accountability.  While technology can greatly benefit investors, it also presents the possibility of significant harm if the information or technology is used in inappropriate or unforseen ways.

The Missing Ingredient to Close the Justice Gap

Richard Uberto, Fall 2018 HeLP Legal Services Clinic Intern

In 1974, Congress created the Legal Services Corporation (LSC) in an effort to ensure equal justice for all Americans under the law. In the decades since, law schools and bar associations have continued to zealously promote “access to justice” initiatives aimed at our most underserved populations. Unfortunately, actual results have failed to keep pace with the lofty rhetoric.

Millions of low-income Americans still lack access to free or affordable legal counsel. The Great Recession further exacerbated the crisis, and even middle-class families simply lack the means to pay market rates that can start at $300 an hour for private law firms. Astonishingly, our legal system fails to meet roughly 80% of the civil needs of low-income Americans. This sobering figure rises even higher for the middle class, who neither qualify for legal aid nor possess the finances to secure representation. And even for those who do qualify for legal aid, representation is often limited. LSC-grantees, for instance, may not assist “undocumented aliens; aliens seeking asylum, refugee status, or conditional entrant status; or other categories of aliens who are legally in the U.S., such as students and tourists.”

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Musk Mondays: The Real-Life “Rocket Man”

By: Dowdy White, Fall 2018 IAC Student Intern

If you have never jammed out to Elton John’s classic hit “Rocket Man,” have you ever truly lived? The song that has inspired generations of music lovers paints a picture of a fictional astronaut who makes his way out into the great unknown of outer space to pursue the awe-inspiring final frontier. For two decades, we were left to only imagine what this “rocket man” looked like. However, what if I told you that he’s real? And that he walks among us?

If you pay attention to the news and keep up with current events, you’ve probably heard about a company called SpaceX. If you don’t recall this company’s name, maybe you heard about the company that sent a massive rocket into space carrying a Tesla Roadster sports car. If you didn’t hear about that either, are you sure you’re not living on the moon? Continue reading

Billionaires Charged in $27 Million Alleged Scheme

By Lynn Mckeel, Fall 2018 IAC Student Intern

Nothing caps off a Friday like a family friendly fraud bust. Last month, the SEC announced they have charged ten individuals and ten associated entities of being involved in an elaborate and highly profitable “pump and dump” scheme. The fifty-three page Complaint, filed in the Southern District Court of New York, alleges the individuals (including gold tycoon Barry Honig and pharmaceutical billionaire Phillip Frost) “agreed to buy, hold or sell their shares in coordination with one another.”  (See SEC Complaint filed on September 7, 2018). According to the Complaint, the fraudsters allegedly “orchestrated transactions designed to create market” interest in the company. Check out the Complaint for a complete list of the dozens of alleged securities violations. Continue reading

Investor Advocacy Clinic Comments on FINRA Discovery Rule Change Concerning Firm Insurance Information

The Investor Advocacy Clinic continues to give all investors a voice. On September 24, 2018, the clinic commented on FINRA Regulatory Notice 18-22, a proposal that would amend the Discovery Guide’s Firm/Associated Persons Document Production List to require brokers and firms to produce documents concerning third-party insurance coverage upon request.

The clinic’s comment, authored by student attorneys Lynn Mckeel , Ben Dell’Orto , Edward Greenblat , Matthew Haan, Kevin Mathis, Brook Ptacek, and W. Dowdy White, support FINRA’s efforts to allow investors to evaluate whether they should go forward with a claim if there is little chance of discovery. Nevertheless, the clinic urged FINRA to take their proposal a step further and adopt the automatic mandatory disclosure of third-party insurance coverage regardless of any formal written request. Georgia permits any litigant to receive insurance information, upon request, before a suit is even filed.  Moreover, federal and many state courts mandate disclosure of insurance information without a formal request.   Requiring firms to produce insurance information early in an arbitration proceeding helps claimants evaluate whether they are throwing good money after bad.  The clinic’s comment is available in full here.

Investing Crossword Puzzles: MLM Business Models

Multilevel marketing (MLM) business ventures are marketing strategies designed to promote products through distributors, offering multiple levels of compensation.

Legitimate MLM business ventures are legal, so long as its focus is on selling tangible products, not payments made by distributors joining the venture. The promotors receive commissions on the sale of the product, as well as compensation for the sales their recruits make.

The main idea behind an MLM strategy is to increase the number of distributors for the product, and with more salesmen meaning more income.

There are a variety of MLM models. Continue reading

Investing Crossword Puzzles: Red Flags for Investor Fraud

Investments can be both fun and financially lucrative. However, it’s important to remain diligent. Brokers may expose themselves to conflicts of interest, some legal and some illegal. It’s not only the investor but also the broker, adviser, and member firm which stand to profit off of the investor’s hard-earned money. Be wary of brokers who make unqualified guarantees. All investments have some inherent risk. Investors should be skeptical about brokers who make performance guarantees about investment products. Continue reading