Approaches v. Answers: A Semester of Approaching Legal Work

By: Esmat Hanano, IAC Intern Spring 2018

It is very difficult to write a blog post about my semester in the Clinic, because if I wrote about everything I wanted to discuss it would certainly be too long. So in the interest of keeping whatever readers may stumble upon my Clinic story, I will try to boil my time in Clinic down to one distinction that has been a major takeaway for me. That distinction is being confident in your approach rather than your answer. An arbitrary distinction? Maybe, but it works for me and I think you’ll see the logic behind it by the end of this post as well. Continue reading

Friday’s Files: New Account Documents

Ben Dell’Orto, Spring 2018 IAC Student Intern

You have some money, and you’re ready to make it work for you, so you contact a broker to (hopefully) add a few digits to your sum. One of the earliest things you’ll receive is what FINRA calls a new account application. Though this is FINRA’s name for it, your broker might call it “a new account form, account opening form or something similar.”

The form asks for a lot of information you’d fill out before a visit to the doctor’s office, like your social security number, driver’s license number, and the information of a “trusted contact person.” The really critical things on this form include what your broker needs to create what FINRA calls an “investment profile” to determine your suitability. Your broker has an obligation to invest your money in a way that fits your specific profile, including your “age, other investments, financial situation and needs, tax status, investment objectives . . . [and] risk tolerance,” in other words, investments suitable for your individual needs.   Continue reading

IOSCO Recommends Standards for Regulators to Address Concerns with Elderly Investors

By Ben Dell’Orto, Spring 2018 IAC Student Intern

The International Organization of Securities Commissions (IOSCO) recently released a report on the threats specific to senior investors. The report followed the analysis of risks and causes particular to older people with an analysis of current regulations and recommended sound practices for regulators.

The report notes that many countries share the same suitability requirements as FINRA in the US, though not many countries have special protections for older investors. FINRA might be special in that it includes “age” as a factor, while other countries such as Spain simply say “in case of the provision of portfolio management and investment advice, intermediaries should take into account the knowledge, experience, financial situation and risk profile of the investor.” “Age” and “experience” are overlapping-but-different concerns, and it is important to note the difference. The SEC and FINRA have also added new regulations to protect older individuals. Continue reading

IOSCO Reports on Effects of Mental Decline on Older Investors and Advisers

By Ben Dell’Orto, Spring 2018 IAC Student Intern

The International Organization of Securities Commissions (IOSCO) recently released a report on the threats specific to senior investors.

While the report specifically describes dementia and mild cognitive impairment as ailments affecting the investment judgment of older people, aging takes its toll even without a specific problem. The report describes diminishing “executive control processes,” which are “related to poor decision-making, problem-solving, and planning for the future.” Continue reading

IOSCO Releases Report on the Vulnerability of Senior Investors

By Ben Dell’Orto, Spring 2018 IAC Student Intern

The International Organization of Securities Commissions (IOSCO) recently released a report analyzing the threats particular to senior investors.

This is a particularly notable issue, since senior-age population percentage is only increasing. The World Health Organization predicts that “Between 2015 and 2050, the proportion of the world’s population aged 60 years or older will nearly double from 12 percent to 22 percent.” While today there are 125 million people aged 80 or older, in 2050 that number will amount to more than 400 million. 80 percent of these “older people will live in low- and middle-income countries.”

While an increase in life expectancy is certainly a positive by any metric, this means we must provide seniors with protection from unsafe investments, since they are becoming an even larger portion of the investment pool. The report notes that while the US and other developed countries are familiar with the challenges created by increasing life expectancy, many low- and middle-income countries are experiencing an even more dramatic boom.

74% of the IOSCO countries have special programs to protect seniors, though seniors are covered by other programs much of the time, not senior specific programs – only 59% have programs specific for seniors.

The report involved surveys of twelve countries and territories including the US, Hong Kong, the Netherlands, and South Africa. 89% of respondents agreed (the other 11% were “unsure”) that seniors risk falling victim to fraud or making a poor investment, and laid out recommendations which will follow in future posts.

Friday’s Files: Why keep documents?

Ben Dell’Orto, Spring 2018 IAC Student Intern

Though everyone expects (and should expect) to be treated fairly by the guy handling his or her investments, in the clinic we know that this will not always be the case. Another thing we know is that the critical thing in proving a claim against an investment adviser or broker is going to require proof. While this proof can sometimes be gathered during discovery, some documents can never be found unless the customer keeps track of them.

The FINRA arbitration forum is not as strict about the rules of evidence as a court, FINRA Rule 12604 stating that “the panel is not required to follow state or federal rules of evidence.” However, the arbitrators are still going to be looking for evidence of a customer’s complaint if they are going to provide a significant judgment. Perhaps more importantly, possession of solid evidence is going to be a key in getting the other side to take your claim seriously; a brokerage firm is much more likely to offer up a solid settlement to somebody with a set of damning evidence than somebody with just a story to tell. Continue reading

Getting Their Priorities Straight: Retail Investors

By Abigail Howd, Spring 2018 IAC Student Intern

In 1961, The Miracles sang, “My mama told me, you better shop around.”  This motherly advice applies to more than just the game of love.  It is good for investors to shop around before committing to investment firms or broker-dealers, and once they find one, investors also need to shop around for which investments are suitable for their financial needs and goals.  Protecting individual investors and consumers, referred to as “retail investors,” is part of the SEC’s mission.  The SEC’s Office of Compliance Inspections and Examinations (OCIE) included retail investors in its 2018 examination priorities.  OCIE provided a list of areas it will focus on to make sure investors have the information they need to shop around and protect themselves.  Here are some highlights from that list: Continue reading