Blog by Bill Singer WEEK IN REVIEW

September 10, 2016

By Elisabeth Miller, Managing Partner, Milava Consulting

In 1978 two families living in the East German town on Possneck decided to escape the shackles of the Soviet-controlled land. Poverty and despair were the unifying characteristic of the people. Crossing the border was dangerous. They called this region the "death-zone." People had been killed on the spot for escape attempts. How did the two families do it? They got their hands on nine hundred square meters of fabric and a gas burner. They built a hot air balloon and flew to West Germany. While the escape happened overnight the planning didn't. More than a year was devoted to planning and testing with at least four failed attempts. They succeeded because they had a plan.

A good plan today is better than a perfect plan tomorrow. If you put together a good contingency plan and an emergency won't feel like a disaster. Financial advisors can heed this advice with a simple review of four key areas. Let's take a look.

Without admitting or deny the charges, Raymond James & Associates and Robert W. Baird & Co. entered into high-profile settlements with the Securities and Exchange Commission ("SEC") involving alleged violations of Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4).  As announced in "Two Firms Charged With Compliance Failures in Wrap Fee Programs" (SEC Press Release, 2016-181 / September 8, 2016), the two firms settled charges involving their use of wrap fee programs. READ the FULL TEXT SEC Orders.

Lately, I've been getting a number of inquiries from folks whose opening line is to assure me that they're "totally legit," which, of course, results in the activation of my early-warning system. Many of these callers proceed to assure me that they're not stockbrokers, not investment advisers, and not investment bankers. Okay, sure, that's fine but what the hell are you and why are you calling me? Eventually, they explain that they are bloggers or writers of financial newsletters. After the preliminaries end and the caller finally gets to the point, we often start strolling through a scary, dark forest of stock promotion schemes and reverse merger pump-and-dumps; and hiding behind every tree and under every rock are scheming trolls and hobgoblins. After we exhaust all the idiotic ideas about funneling fees to the wife or son-in-law and briefly touch on the fact that the caller was barred from the securities industry, more often than not, I never hear back from individual seeking my legal services. Sadly, I was so looking forward to the $100,000 retainer for criminal defense work. 

I admit that not all folks who seek to promote companies and their securities are crooks. There are some who are totally legit. The problem is that it's a dicey industry when it comes to following stocks and making recommendations. For those who fail to follow the rules, the prospect may be, at best, dancing with securities regulators, and, at worst, doing the perp walk with criminal prosecutors. As demonstrated in a recent Securities and Exchange Commission civil Complaint, Wall Street's cops are on the prowl and more than ready to charge those who seem to have gone astray. READ

It has become an increasingly frequent topic of conversation in my law practice:
  • A registered representative is also an employee of a non-FINRA-member affiliate of the broker-dealer;
  • the rep is discharged by the affiliate for non-securities related issues;
  • the broker-dealer discharges the registered rep largely based upon the termination by the affiliate; but
  • regulatory disclosures filed by the broker-dealer present the appearance that the misconduct took place at the FINRA member firm and involved securities-industry misconduct.
That cascade of events typically occurs when the FINRA member firm broker-dealer files a Form U5 that parrots the reasons for termination provided by the affiliate. Since the affiliate is not a broker-dealer and is not a FINRA member firm, why should the affiliate's explanation for termination be filed by the FINRA member in a formal regulatory disclosure document? READ.

Career Skid Marks Left By Altered Auto Insurance Declaration Page

The concept of customer service is often elusive from the perspective of customers. You call a so-called customer-service telephone line and you're asked to push endless amounts of numbers, listen to truly annoying music, and seemingly caught in an endless loop of options that never quite lead to a sentient human being -- and all too often, just when you hear the beeps indicating that you're being forwarded to a member of homo sapiens, you're disconnected and forced to go through the whole series of questions and delays. A recent regulatory settlement shows the extent to which one State Farm employee went to deliver rock-bottom automobile insurance prices for his customers. One suspects that his customers were truly appreciative of his over-the-top service. One suspects that his employer was less than enamored. One knows that the industry regulator wasn't at all thrilled. READ