Articles by Janell

FINRA has fined Morgan Stanley Smith Barney $1 million and ordered another $371,000 in restitution and interest to customers for excessive markups and markdowns charged to customers on corporate and municipal bond transactions as well as other supervision violations.

The SEC has ordered Broker-dealer FTN Financial Securities to pay nearly $2 million for allowing a registered investment advisor, Sentinel Management, to defraud its clients through a reverse repurchase transaction.

The Chase unit recommended risky investments to unsophisticated investors with little or no risk tolerance, FINRA said.

Leaders of the Financial Services Institute expressed cautious optimism about their efforts to dilute or derail an initiative under way at the Department of Labor to broaden the scope of the term "fiduciary", a top policy priority for the advocacy organization.

Wachovia Bank, NA, currently Wells Fargo & Co., has reached a tentative settlement of a class action suit with municipal issuers over antitrust charges of bid-rigging for municipal investment, derivatives and other contracts.

SEC Fines UBS $8 Million for Bad Recordkeeping

UBS Securities has once again been penalized for its improper handeling of short sales. This fine from the SEC is for $8 million and a $12 million fine was imposed by FINRA less than two weeks ago.

FINRA Fines UBS $300,000

UBS Financial Services, Inc. was fined $300,000 by FINRA for failing to supervise and prevent excessive crosstrading of municipal securities between the customer accounts of one broker for a two-year period.

The SEC recently notified all existing and pending federally registered advisors that regardless of their fiscal year end, they must file a Form ADV Part 1 amendment by March 30, 2012 by answering the recently added new questions and indicating the regulator the adviser should be registered with.

Most advisers with a December fiscal year end will choose to complete this task as part of their annual amendment filing. Those advisers with fiscal years ending in months other than December will generally complete the aforementioned task by filing an other-than-annual amendment to their Form ADV Part 1. ARC is advising State registered advisers to update their Form ADV Part 1 at this time and follow the general guidance the SEC has provided to federally registered advisers in this regard.

An adviser should also amend its brochure and brochure supplements if any information has become materially inaccurate.

Advisers seeking to file other-than-annual amendments to update only limited sections of their Form ADV (for example: only the Part 2 brochure or their address in item 1) must complete all questions, including new and revised questions, on Part 1 of the Form ADV. Advisers that must switch from SEC to State registration because they do not meet the SEC's new assets under management regulation threshold of $100,000,000 ($90,000,000 for established advisers filing their most recent annual amendment filing) should mark Item 2.A. (13) of Form ADV Part 1 and begin registering with the State(s) to ensure they can withdraw their SEC registration by June 28, 2012. Failure to meet the deadline may result in the adviser's de-registration with the SEC.

An Arbitration panel shot down a claimant's request for up to $2.9 million for allegedly botched investments tied to private placements and Ponzi schemes last week, and instead ordered her to pay almost $136,000 in costs and expert witness fees.

The decision from the Financial Industry Regulatory Authority arbitration panel followed a two-year case that began when California resident Jaimie Davis first filed her February 2010 claim against FINRA member firm WFP Securities Corp., registered representative Curtis Jerome Sathre III and WFP President John Evan Schooler. Davis’s statement of claim cites $350,000 in losses tied to fraudulent investments that are suspected Ponzi schemes. (Including Medical Capital Corp. and Striker Petroleum LLC) In addition, more than $1 million was invested in “speculative, illiquid real estate and oil and gas interests” without proper disclosure of their risks and lack of liquidity, according to the claim. The claim cites $1.86 million that Davis may lose due to risky, illiquid investments in other private placements. In her claim, Davis asserted breach of fiduciary duty, breach of contract, negligence, failure to supervise and control person liability and violation of California Corporations Code.

In a decision dated March 1, the FINRA arbitration panel ruled in favor of the respondents. The FINRA dispute resolution documents said that the panel determined that Davis failed to prove the causes of actions or allegations in her original claim. Those documents also note that Davis also has filed arbitration claims with the American Arbitration Association; JAMS Arbitration, Mediation and ADR Services; and also has a court case against some of the investments sponsors. Some of those cases have settled and some are ongoing, according to FINRA’s dispute resolution document.

“The panel found it highly likely that Claimant sought double recovery from the claims Claimant filed in this arbitration and in other forums,” FINRA’s document said. “Claimant’s actions protracted the FINRA Dispute Resolution arbitration proceedings and enhanced the costs and fees of Respondents. Claimaint’s actions are in direct violation of FINRA Code Rule 12209.” With that, the FINRA panel dismissed Davis’ claims and ordered her to pay $135,755.89 plus 10% annual interest, from the date of the award until it is paid, for the respondents’ costs and expert fees. In addition, the FINRA panel also recommends the expungement of references to the arbitration from both Sathre’s and Schooler’s records.