Securities and Investment Blog

The Arbitration System
The premise that underlies the justification for the loss of rights in arbitration is simple: both parties knowingly agreed to binding arbitration. This presumption is based upon the presumptions that 1) signators read contracts before signing, 2) they have the time and knowledge to understand the implications of the arbitration provision, and 3) they have a viable ability to opt-out of agreeing to the provision. Arbitration's entire legitimacy is based upon these fairly specious presumptions. And there has been much written about these presumptions and whether or not binding arbitration is actually the product of an informed...

The Harms and Indicators of Excessive Trading
 Many securities brokers work for commissions. This means that they charge investors a fee whenever executing a trade on their behalf. This method of compensation has, in the past, enticed some nefarious brokers to increase their compensation by making more trades on a customer’s behalf than is in the customer’s best interest. What is Excessive Trading? Excessive trading, also known as churning, occurs when a securities broker executes trades in a customer’s account at an unsuitable frequency in an effort to increase their own commissions. Make no mistake, excessive trading is illegal. Unfortunately, in all but...

U-5 Filings and the Compelled Self-published Defamation Doctrine
 Last year, the California Court of Appeals issued a highly instructive opinion in the area of U-5 defamation. Some excerpts from that opinion will help us get started on a variety of blogs. The case is Tilkey v Allstate Insurance Company. INTRODUCTION While Michael Tilkey and his girlfriend Jacqueline Mann were visiting at her home, the two got into an argument. Tilkey decided to leave the apartment. When he stepped out onto the enclosed patio to collect his cooler, Mann locked the door behind him. Tilkey banged on the door to regain entry, and Mann called police. Tilkey was arrested and pled guilty to a disorderly conduct...

Gary Gensler Nominated to be the New SEC Chairman
On January 18th, a few days before Biden was sworn in as President, he announced his nomination for the new Securities and Exchange Commission (“SEC”) chairman.  President Joseph Biden named Gary Gensler as his pick for SEC chairman[1].  While Gensler still needs to be confirmed by the senate[2], it is expected that he will be approved. Gensler’s confirmation will create a 3-2 democratic majority in the SEC commission. Gary Gensler has an extensive resume within the financial industry.  He is a former Commodity Futures Trading Commission (“CFTC”) chairman, and is known for supporting intensive regulation....

FINRA Orders Worden to Pay $1.2 Million in Restitution to Customers Whose Accounts Were Excessively Traded
FINRA announced last week that it sanctioned Worden Capital Management LLC (WCM) more than $1.5 million, including approximately $1.2 million in restitution to customers whose accounts were excessively traded by the firm’s representatives, and a $350,000 fine for supervisory and other violations. WCM must also retain an independent consultant to conduct a comprehensive review of the relevant portions of the firm’s supervisory systems and procedures. FINRA found that from January 2015 to October 2019, WCM and the firm’s owner and CEO, Jamie Worden, failed to establish and enforce a supervisory system reasonably designed...