SEC Finding Spotlight: February 2019
Whether you have substantial experience working with brokers and making investment decisions or you are new to the world of finance, having an experienced broker at a brokerage firm to help you navigate the constantly changing markets can be a major asset. Just like choosing a doctor or a lawyer, however, choosing a broker and brokerage firm can be particularly stressful. Many brokers appear trustworthy and like they have your best interests in mind, but it can be hard to know whether they will have that same approach when making financial decisions or rendering advice. Some brokers abuse their relationships with clients for their own personal gain, encouraging them to make transactions that will boost profits for the broker with only marginal benefits to the investor. At the Law Office of Steven A. Buchwalter, we proudly assist residents throughout Southern California with holding negligent brokers responsible after engaging in securities-related fraud or negligence. If you have questions about whether you have been a victim of misconduct in this context, an experienced Los Angeles securities attorney can help you understand your legal rights.Private Broker Deals Involving Fraud
The Financial Industry Regulation Authority (FINRA) is the agency responsible for overseeing securities transactions and ensuring that investors are being treated fairly. FINRA has created many different rules and regulations to achieve this goal. It conducts investigations into allegations of broker fraud or misconduct and has the power to initiate enforcement actions to penalize brokers who are found to be in violation of these laws.
Recently, FINRA completed an enforcement action against a broker named Gary L. Pevey, who was based in Sacramento, California, and engaged in securities transactions without obtaining approval from his brokerage firm, Mutual Securities. Between March 2011 and February 2018, the broker was registered as a General Securities Representative with Mutual Securities.
Between June 2016 and August 2017, the broker induced investors to purchase promissory notes related to a group of companies that appeared to be a real estate investment fund. He sold over $1 million in notes to 15 investors. Five of these investors were clients of Mutual Securities. As a result of these transactions, the broker received over $40,000 in commissions.
According to FINRA Rule 3280(b), before engaging in any securities transaction, a broker must give written notice to his or her brokerage firm providing a description of the proposed transaction and indicating whether the broker stands to receive compensation from the deal. Mutual Securities’ written supervisory procedures reflected this requirement. According to its rules, brokers were required to seek approval before performing private securities transactions, which includes promissory note offers. A securities lawyer in Los Angeles can assess whether your broker has complied with rules of this nature.
In violation of FINRA Rule 3280(b) and Mutual Securities’ policies, the broker failed to provide notice of these transactions and failed to obtain approval before completing the investments. As a result, he was discharged from Mutual Securities’ brokerage firm, suspended for a year, fined $10,000, and required to disgorge the fees that he received in relation to the transactions.Private Broker Transactions Leading to Fraud and Misrepresentation
When it comes to ensuring that your broker is treating you fairly, working with a broker who routinely engages with a brokerage firm will often reduce the chances that the broker is engaging in fraud or negligent conduct. The brokerage firm acts as a supervisory body, ensuring that its members abide by the rules and that investors are treated fairly.
In the unfortunate event that your broker engages in fraud or other unlawful conduct, you can bring a civil action to receive compensation for your losses, and a skilled Los Angeles securities attorney can help. In the case, you will need to show that the broker failed to act with a high degree of fiduciary care, such as by violating a FINRA regulation in relation to your accounts. You must also show that this fraudulent conduct or negligence was the direct cause of the damages that you suffered. In other words, if the defendant can show that some other force, such as fluctuations in the market, was to blame for your losses, you may not be entitled to recovery.
If you are successful in proving these elements, you are entitled to receive the difference between the value of your account after the misconduct and the estimated value that your accounts would hold had the broker acted accordingly.Securities Lawyer Serving Los Angeles
If you were burned by your broker due to fraud or other misconduct, you may be entitled to compensation. With clients throughout Los Angeles and Southern California, our team of legal professionals proudly assists investors with asserting their right to compensation against a reckless or careless broker. We offer a free consultation to discuss your situation so that you can learn more about your potential cause of action and whether we can assist you. Call us now at 818-501-8987 or contact us online to get started.