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SEC Approves FINRA Rule To Limit Expungement

The SEC approved a new FINRA rule that will make it hard for brokers to delete customer complaints from their records in arbitration cases. Rule 2081 will prevent brokers from making settlements with customers requiring the claimant to accept expungement of the case from the broker's public record. The goal of the new rule is to ensure that brokers cannot conceal customer complaints in run-of-the-mill cases but only more extreme cases. According to the Public Investors Arbitration Bar Association, expungement requests were granted in 89% of cases resolved by stipulated awards or settlement between 2007 and 2009. That number has since moved up to 96.9% from May 2009 to the end of 2011. The SEC has stated that arbitrators have granted expungement too often and that it wants accurate and complete information to be available to the public. Many people, however, believe that the rule is not strong enough, pointing out that brokers would still be able to expunge legitimate [...]

By |July 24th, 2014|Press Releases & News|
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Citigroup Avoids FINRA Arbitration, Still To Pay $590M

A federal judge in New York ruled this week that Citigroup would not have to face FINRA arbitration regarding claims that its stock dropped precipitously after it hid securitized-loan losses because an arbitration would violate an already existing $590 million dollar settlement over the same claims. An arbitration had been begun by Gary Burgess and Joseph Icon, two former Citigroup employees who claimed not to be included in the 670,000-person settlement class. Burgess argued that he should not have been included because he failed to opt out of the class, and Icon argued that he did not understand the release. U.S. District Judge Sidney Stein, however, was not swayed and held that Burgess and Icon were in fact included in the settlement class, thus blocking the FINRA arbitration. Stein wrote that the claims the two men were trying to bring were the exact same claims previously settled. In August 2012, Citigroup agreed to pay $590 million to settle consolidated class [...]

By |July 23rd, 2014|Press Releases & News|
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Former Sterne Agee Broker May Be Expelled

Dean Mustaphalli, a former broker at Sterne Agee Financial Services Inc., is looking at a potential expulsion. According to FINRA, Mustaphalli ran a $6 million hedge fund, Mustaphalli Capital Partners, that he failed to disclose. FINRA charged Mustaphalli for creating the fund and receiving commissions without notifying the broker-dealer. He sought cash for the fund from more than 25 investors for more than half of 2011. Between April and August of 2011, Mustaphalli received about $41,800 in management fees. The fund's value has allegedly dropped by about 90% since then. To date, FINRA is unsure if any of Mustaphalli's clients were customers of Sterne Agee, but a lawyer filing two arbitration claims against Mustaphalli claims that one of his clients was in fact a customer of Sterne Agee. FINRA states that Mustaphalli was not providing account statements for the hedge fund as requested. Under FINRA's rules, brokers are allowed to operate hedge funds as long as they are fully disclosed, [...]

By |July 15th, 2014|Press Releases & News|
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FINRA Bars Broker For Insider Trading In Japanese Securities

Last week, FINRA barred Kenneth Ronald Allen from the securities industry. Allen, who was once an equity trader at First New York Securities L.L.C., was found to be trading Japanese securities because of non-publicized, material information acquired from a corporate insider. According to an investigation by FINRA, the Office of Fraud Detection and Market Intelligence, and the Department of Enforcement, Allen placed orders using a firm proprietary trading account from New York City to short sell shares of Tokyo Electric Power Company Inc. (TEPCO), a company listed on the Tokyo Stock Exchange, in September 2011. Having inside information that TEPCO was about to announce a secondary public offering of its securities, Allen generated a short position in TEPCO shares. Allen obtained the information from a consultant, who in turn obtained it from an employee at Nomura Securities Co. Ltd., a sizable Japanese broker-dealer out of Tokyo that underwrote the TEPCO offering. Between September 15, 2010 and September 28, 2010, Allen [...]

By |July 7th, 2014|Press Releases & News|
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