Update on SR-FINRA-2014-005: SEC Institutes “Rare” Proceedings on Proposed FINRA Rule Concerning Arbitrators’ Mid-Case Referrals

In March, the Investor Advocacy Clinic, led by student interns Scott EvansBenjamin Stubbs and Patricia Uceda, filed a comment on SR-FINRA-2014-005.  As explained in Evans’ earlier post describing the proposal and the clinic’s comment, the proposed rule would permit arbitrators to speak up mid-case and refer up the ladder their belief, based on more than just the pleadings, that investors may be threatened by the continuing conduct of a wrongdoer.  While the clinic supported the proposal’s goal of protecting innocent investors, we raised concerns about the individual investor in the proceeding and how such a mid-case referral would impact the proceeding and the complaining investor.

After receiving comments on the proposal, FINRA responded to all comments, including those made by the clinic.  You can read FINRA’s response here.

In addition, the SEC instituted formal proceedings to consider FINRA’s proposal. Citing FINRA’s former director of arbitration, Investment News reports that the SEC’s institution of proceedings on a proposed FINRA rule change is rare.

You can read the SEC’s full notice in the Federal Register here.  Specifically, the SEC has asked interested parties to consider providing information in response to several questions directly related to the concerns raised by the clinic in its comments:

  • Would the proposal adversely affect retail investors?  If so, how?
  • Should FINRA propose a different standard for referral? If so, what standard(s) would be appropriate?
  • Does Partial Amendment No. 1 ameliorate commenters’ concerns that notifying parties of a mid-case referral could lead to adverse consequences to the claimant, including requests for recusal and challenges to an award? If not, should FINRA amend the proposal to preclude the Director, or anyone else, from notifying the parties of a referral?

Parties interested in providing information for the SEC’s consideration should do so by the June 26, 2014 deadline.

The clinic will continue to monitor SR-FINRA-2014-005 and other proposals that may impact individual investors.

Interns Engage in Investor Education

presentersOn Tuesday April 29, 2014, Investor Advocacy Clinic student interns Scott Evans, Benjamin Stubbs and Patricia Uceda presented “Guidance for your Investment Journey” to a group of Georgia State University College of Law students.

Stubbs began by discussing the need to create a plan and start to save now. He asked the audience to identify their long term goals, which included paying off student loans, retiring and saving for a house.

studentsEvans then discussed the professionals who can help investors meet their goals. He outlined the different services such professionals can provide and showed the audience how to do research on them by using FINRA’s BrokerCheck tool. Participants also learned how to decode different certifications and learn what they mean by using FINRA’s Professional Designations Database.

Uceda provided an overview of the products investors might consider to reach their goals. After analyzing whether the participants were at risk of fraud, the interns showed them how to be prepared to respond to fraudsters’ tactics and hang up on fraud.

If you or your organization are interested in a custom-tailored investor education presentation, please contact the clinic at (404) 413-9270.

GSU Law Students: Be an Informed Investor. Attend the Investor Advocacy Clinic’s Educational Presentation Tomorrow.

LAW_IACApril is financial literacy month, and the Investor Advocacy Clinic’s student interns are making sure that potential investors have the information they need to make wise financial decisions.

On Tuesday, April 29, student interns Scott Evans, Benjamin Stubbs and Patricia Uceda will present “Guidance for Your Investment Journey” at the Georgia State University College of Law to current law students in Room 330 from 12:00 – 1:00 p.m.  This presentation will help new investors learn how to protect themselves from becoming victims to investment fraud and make wise decisions as they save for their future.

Clinic Students to Present Investor Education During Financial Literacy Month

April is financial literacy month, and the Investor Advocacy Clinic’s student interns are making sure that potential investors have the information they need to make wise financial decisions.

On Tuesday, April 22, interns Thomas Abrahamson, Timothy Guilmette and Nataliya Nemtseva will meet with cadets in Georgia State University’s ROTC.  Their presentation, “Take Charge of Your Financial Future,” will discuss financial readiness, budgeting, saving and planning for the future and is tailored for members of the military.

On Wednesday, April 23, graduate research assistant Dylan Donley and fall 2013 student intern D. Russell Stroud will present “There’s no Such Thing as a Free Lunch: Getting to Know the Red Flags of Fraud and Common Scams Against Seniors” to a group of law students studying elder law.  This presentation will educate future lawyers interested in working with seniors, providing them with information and tools to protect seniors from scams.

On Tuesday, April 29, student interns Scott Evans, Benjamin Stubbs and Patricia Uceda will present “Guidance for Your Investment Journey” at the Georgia State University College of Law to current law students in Room 330 at noon.  This presentation will help new investors learn how to protect themselves from becoming victims to investment fraud and make wise decisions as they save for their future.

Each of these presentations is made possible by a grant from the FINRA Investor Education Foundation.

Interested in an investor education presentation for your organization?  Call us at (404) 413.9270 and we would be happy to discuss how the clinic can create a presentation tailored to your audience.

Supervision in the Securities Industry

By Scott Evans, Spring 2014 Student Intern

gradeOne of the many duties imposed by FINRA upon securities brokerage firms is the duty to supervise their individual brokers.  FINRA expressly mandates that brokerage firms maintain a system of supervision over its employees to ensure compliance with applicable securities laws and regulations.  In order to carry out this duty, firms are required to have a monitoring system in place so that all of their registered representatives are subject to supervision.  For an illustrative, high-profile example of this claim being used against renowned trader, see this article relating to billionaire hedge fund manager Steven A. Cohen. Continue reading

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 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

Continue reading