Monthly Archives: January 2018

The Financial Industry Regulatory Authority (“FINRA”) recently banned Robert Hayes Hoffman from the securities industry for failing to cooperate with an investigation into a customer complaint against him while he was registered with Woodbury Financial Services in Greenwood, Indiana.  He was registered with Woodbury from 2006 until March 2017.

FINRA records currently show 2 customer complaints against Woodbury and Hoffman, both of which are in FINRA arbitrations. In early 2017, a customer alleged that Hoffman and Woodbury made unsuitable investment recommendations, unauthorized trades and had traded the account(s) excessively. This customer has alleged damages of at least $3.2 Million.

In October of 2017, FINRA demanded that Hoffman provide “on the record testimony” about this customer complaint. Hoffman refused to testify and was subsequently barred from the industry by FINRA, as his refusal to testify violated FINRA rules.

A second customer complaint was filed in November 2017 alleging that Hoffman and Woodbury violated their fiduciary duties in multiple ways, including recommending unsuitable investments. The amount of the second investor’s damages has not yet been disclosed.

Our firm is investigating investor claims against Woodbury Financial and Robert Hayes Hoffman for the improper sale of unsuitable investments, unauthorized trading and excessive trading of investor accounts. If you are an individual or institutional investor who has any concerns about your investments with Woodbury Financial or Robert Hayes Hoffman, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.

A front page article in The Wall Street Journal on January 11, 2018 (“Advisers at Leading Discount Brokers Win Bonuses to Push Higher-Priced Products”) exposed the fact that Fidelity, Charles Schwab and TD Ameritrade employees win extra pay and other incentives to put clients in products that are more lucrative for them and the firm.

As noted in the article, while “investors who seek advice from discount brokerage firms might assume the counsel they get is impartial, given how these firms have rejected the old Wall Street model of working on commissions, in fact, advisers at some of the biggest discount brokerage firms make more money if they steer clients toward more-expensive products, according to disclosures from the firms and people who used to work at them. That means customers could end up with investment products and services that are costlier than they need.”

Among the findings that are highlighted in this article are the following:
“Fidelity representatives are paid 0.04% of the assets clients invest in most types of mutual funds and exchange-traded funds. They earn more than twice as much, 0.10%, on choices that typically generate higher annual fees for Fidelity, such as managed accounts, annuities and referrals to independent financial advisers. At Fidelity, sales incentives not only enhance pay directly but also help representatives win ‘Achiever’ bonuses that can be tens of thousands of dollars a year.

Charles Schwab employees with exceptional service and client satisfaction can qualify for the Chairman’s Club, winning a trip to a Hawaii or Florida resort. For advisers, sales volume also can be part of the calculation. The firm’s compensation practices could create ‘a financial incentive to recommend [managed accounts] over other products and services,’ said a 2016 Schwab disclosure of compensation practices.

TD Ameritrade discloses in a document on its website that sales bonuses could give financial consultants an incentive to make recommendations for asset retention with a view to their compensation rather than the best interest of clients.”
“The products and services for which employees of Fidelity, Schwab and TD Ameritrade are best paid charge an annual fee – a percentage of assets – to offer advice.”

According to The Wall Street Journal, “all three firms pay incentives to representatives for referring clients to independent investment advisers. These advisers charge clients an annual percentage of their assets, and the discount brokerage firms receive up to 0.25% annually on assets committed to the advisers.”

If you are an individual or institutional investor who has any concerns about your investments with any discount brokerage firm, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

The Financial Industry Regulatory Authority (FINRA) is cracking down on the rollover of retirement accounts and other brokerage accounts to fee-based advisory accounts. FINRA examiners are likely to ask more questions this year about the timing of and recommendations to switch these accounts.

This area is a new addition to the annual Regulatory and Examination Priorities Letter, whose 2018 edition was released on Monday as an aide to help firms focus their growing compliance, supervisory and risk management responsibilities, and serve as a warning to brokers about where FINRA disciplinary actions may occur.

The letter’s “sales practice risks” section focused on the rollover of retirement accounts from brokerage accounts to advisory accounts as a new priority area.

FINRA said it is closely watching the timing of recommendations to move customers from traditional commission-based brokerage accounts to fee-based advisory accounts, a twist on the issue of reverse churning that other regulators have identified as an issue for buy-and-hold clients.

“FINRA will review situations in which registered representatives recommend a switch from a brokerage account to an investment advisory account where that switch clearly disadvantages the customer, such as where the registered representative recommended that the customer purchase a securities product subject to a front-end sales charge in a brokerage account and then shortly thereafter recommended that account be transferred to a fee-based account,” the exam priorities letter said.

Our firm is investigating claims against various brokerage firms for the improper rollover of accounts from brokerage to advisory account. If you are an individual or institutional investor who has any concerns about the rollover of your retirement or other accounts from brokerage to fee-based advisory accounts, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.

The Financial Industry Regulatory Authority (FINRA) is cracking down on the sales of securities-backed loans to investors. FINRA examiners are likely to ask more questions this year about sales to retail investors of securities-backed loans.

This area is a new addition to the annual Regulatory and Examination Priorities Letter, whose 2018 edition was released on Monday as an aide to help firms focus their growing compliance, supervisory and risk management responsibilities, and serve as a warning to brokers about where FINRA disciplinary actions may occur.

The letter’s “sales practice risks” section zeroed in on Securities Backed Lines of Credit as a new priority area.

According to FINRA, general-purpose loans collateralized by customers’ investment portfolios have “increased significantly in the past years,” and FINRA is further concerned about  whether firms are adequately disclosing such risks as “the potential impact of a market downturn, the potential tax implications if pledged securities are liquidated and the potential impact of an increase in interest rates.”

Morgan Stanley paid $1 million last April, 2017 to settle charges that it used sales contests to drum up securities-backed loan sales in several branches in New England. However, these products have been aggressively sold by many brokerage firms.

Our firm is investigating claims against various brokerage firms for the improper sale of securities-backed loans and lines of credit to their customers. If you are an individual or institutional investor who has any concerns about your investments in securities-backed loans or lines of credit, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing a securities arbitration case with FINRA.