Featured Investigation: August 2020

When we seek out financial counsel, we may have little familiarity with the consumer protection rules that apply to the securities industry. To ensure that investors are treated fairly and not taken advantage of, the Financial Industry Regulatory Authority (FINRA) enacts rules to keep investors safe from broker fraud or negligence. Some of these rules have govern the broker-client relationship, such as by requiring brokers to obtain directions from their clients regarding how investments should be managed and aligned with financial goals. Unfortunately, some brokers and brokerage firms are careless or intentionally deceptive in their compliance with FINRA’s rules. Steve A. Buchwalter is a Los Angeles securities lawyer who helps Southern California investors seek compensation for their financial losses whether their broker acted with carelessness or attempted to defraud them. Schedule a consultation to discuss your case with him.

In a recent enforcement action, FINRA concluded that Barry John Hartwyk of RBC Capital violated rules requiring brokers to obtain certain instructions from investor clients in writing. Hartwyk became a broker in 1989 and associated with four different firms during that time. FINRA concluded that while he was working at RBC Capital, he conducted a total of 208 discretionary trades in eight customer accounts between March 2018 and October 2018.

NASD Rule 2510(b) prohibits a broker from “exercis[ing] any discretionary power in a customer’s account unless such customer has given prior written authorization to a stated individual or individual’s and the account has been accepted by the [broker].”

The customers had given Hatwyk verbal authorization to exercise this discretion but he failed to obtain written authorization. RBC Capital terminated Hartwyk in November 2018 for his failure to comply with FINRA’s clear rules on obtaining client authorization in writing to take discretionary actions.

If you suffered financial losses as a result of a broker’s failure to comply with FINRA rules or to handle your accounts according to the fiduciary duty that brokers must follow, you may be entitled to compensation. Brokers are held to a high standard of care when it comes to handling investors’ accounts, complying with rules and regulations, and dealing with investors with complete candor. If a broker fails to comply with this high duty of care, then the investor can bring a claim to recover compensation for the financial losses that the investor suffered as a result of the failure. To understand the complicated FINRA rules that may cover your individual situation, seek counsel from an experienced attorney who understands how these rules apply to your claim.

If you are successful in showing that the broker’s negligence or recklessness caused you financial harm, you are entitled to receive the difference between the value of your accounts after the improper conduct and the estimated value that the accounts would have contained had your broker handled your accounts properly. If you can show that the broker engaged in intentionally deceitful or manipulative conduct such as intentionally making unauthorized trades, deceiving you about the appropriate ways to achieve your financial goals, or using your account for personal financial gain, you may also be able to seek punitive damages against the broker to punish him or her for his or her reckless conduct. And you may also have a claim against the brokerage firm that employs the broker if it failed to engage in appropriate oversight and management of its brokers.

Attorney Steve A. Buchwalter has seen firsthand just how quickly broker negligence or fraud can lead to financial ruin for investors. He is a former securities broker, which gives him a unique perspective when evaluating potential claims against brokers and their brokerage firms. He is available to serve clients throughout Southern California, including in Pasadena, Beverly Hills, Newport Beach, Irvine and Santa Barbara, as well as throughout Los Angeles, Orange and Ventura Counties. To schedule your consultation, call his office at (818) 501-8987 or contact him online to get started.