The term “penny stock” generally refers to stocks that trade below five dollars per share, or that were issued by small companies with limited revenue. The trading market for penny stocks is thin, and is usually dominated by one or two brokerage firms who have an interest in the companies’…
Most investments purchased by customers can be easily sold with just a phone call. Stocks, bonds and mutual funds trade on transparent exchanges where brokerage firms are obligated to get the best price for their customers. But some investments don’t trade on an exchange, leaving investors at the mercy of…
FIRNA is an acronym for the financial industry regulatory authority. FINRA is a not for profit organization, authorized by congress to oversee the regulation of investment professionals. FINRA writes and enforces rules of conduct governing brokerage firms and registered representatives. They oversee the licensing of investment professionals, and conduct audits…
Every broker dealer has a duty to establish and enforce an effective supervisory system designed to prevent violations of the securities laws. FINRA Rule 3110 sets out the requirements for establishing and implementing a supervisory system. The branch manager and the chief compliance officer have a multitude of duties and…
Before an investment can be offered to investors a licensed FINRA broker dealer has an affirmative obligation to investigate the product being sold. For large cap publicly traded stocks the investigation might simply be insuring the company is current in its SEC filings. For private placement investments, the due diligence…
Excessive trading, sometimes called churning occurs when a financial advisor, exercising control over an investor’s account engages in transactions which are excessive in size and scope to the needs and objectives of the client for the purpose of generating commissions. Churning generally occurs in accounts where the financial advisor has…
There are a number of instances where investment losses are recoverable. These cases fall broadly under three categories: excessive trading, unsuitable investments and misrepresentations. These are discussed more fully under the topic “What Types of Investment Losses are Recoverable. Most people are unaware that investment losses can be recovered;…
Aaron Parthemer a former registered representative with Morgan Stanley and Wells Fargo was barred from the securities industry on March 6, 2015. In their complaint, which Aaron Parthemer neither admitted nor denied, FINRA found that Parthemer engaged in private securities transactions without obtaining written approval from his broker dealer, and…
FINRA Dispute Resolution reports that through March 2012 new cases filed are down eight percent year over year from 2011. There were a total of 4,727 cases filed in 2011 which was down from 5,680 in 2010. Through March 2012 variable annuity claims were the most common type of claim…
In publishing Regulatory Notice 12-03 FINRA called on broker dealers to increase supervision and compliance when dealing with complex products.” These investments include any security or strategy with “novel, complicated or intricate derivative like features.” Examples are asset backed securities, unlisted REITs, structured notes, leveraged and inverse ETFs. This notice…