At first glance, the scenario is similar to other email scams, but these attacks differ in a significant way. In past instances, customers are sent emails asking for private information that is then used to fraudulently obtain information that allows outsiders to gain access to accounts.

As noted in the Regulatory Notice executive summary, the scheme has several steps that make it appear that the transfer requests are legitimate. But in fact the perpetrators have gained access to an investor's email and contact lists and that information is then used to instruct firms to make transfers into accounts controlled by third parties, not the investor. In some instances, these fraudulent "instructions" might include what are also fraudulent letters of authorization that attempt to pressure firms into releasing funds prior to a follow-up phone authorization.

The FINRA warning is intended to inform the public to avoid these circumstances by safeguarding assets. The Regulatory Notice is also intended to halt this trend by helping firms understand that allowing or accepting email instructions is fraught with risk. The hope is that firms will reassess their policies with regard to instructions, which should help protect against this fraudulent practice on the part of hackers.

Once an individual is aware of or suspects that email has been compromised, FINRA is asking that investors immediately inform their brokerage firms or financial institutions of this problem.

Referring generally to NASD Rule 3012 and NYSE Rule 401, RN12-05 reminds firms that they must establish, maintain and enforce written supervisory control policies and procedures that are reasonably designed to review and monitor the transmittal of funds or securities from customer accounts to third-party accounts. These requirements and their scope have been delineated in Regulatory Notice 09-64, which "highlighted a number of questions firms should consider in assessing the adequacy of their policies and procedures for verifying the validity of requests to withdraw or transfer customer funds."

This increase of fraudulent email activity serves as a reminder that firms should be vigilant in assessing and establishing policies and practices as to electronic communications with investors. Assessing the risks involved with the way in which investors are permitted to communicate instructions for the withdrawal or transfer of funds through electronic means, including verification and follow-up, are recommended.

The lawyers of Wall Street's Gusrae Kaplan Nusbaum PLLC are experienced advisors to firms and broker-dealers in all areas of compliance. Contact our law firm for more information on our wide range of services, including litigation and enforcement representation. We are a firm comprised of experienced former senior level regulators and securities and compliance litigators, providing advisory services to our clients in regulatory compliance.

Conflict of interest allegations can arise in various circumstances in the securities industry. Earlier this month, Citigroup Global Markets, Inc., settled conflict of interest allegations with the Financial Industry Regulatory Authority (FINRA) that arose in the context of research reports and research analyst's public appearances. The firm has agreed to pay $725,000 for the resolution of the allegations against it.

FINRA claimed that Citigroup did not disclose potential conflicts of interest that were relevant to business relationships that it maintained. At issue in the matter were research reports that the firm published from early 2007 through the first quarter of 2010. Part of the problem was alleged by FINRA to have been due to supervisory failures that otherwise might have caught the lack of required disclosures.

Additional allegations made by FINRA in this situation related to several issues. First, the firm did not disclose its management or co-management of public securities offerings; second, the firm did not disclose that it made a market in the securities of, and/or had a one percent or greater beneficial ownership in, covered companies from which it received revenues, and; third, the firm failed to disclose this in research reports.

Added to these allegations is the claim by FINRA that in public appearances, research analysts did not disclose potential conflicts when allegedly conflicted companies were discussed. According to FINRA's Executive Vice President and Chief of Enforcement, Brad Bennett, these alleged failures " 'prevented investors from being aware of potential biases in its research recommendations.' "

A major factor in the disclosure failures was stated by FINRA to be problematic databases that were used by the firm to manage and identify conflicts of interest. In this case, as in many others we have posted in the past, the databases were claimed to have been either inaccurate and/or incomplete. These database problems are alleged to have derived from what were deemed to be "technical deficiencies."

Wall Street's Gusrae Kaplan Nusbaum PLLC represents broker-dealers in regulatory and enforcement matters. We regularly advise clients and defend industry members before all regulatory entities in matters involving a broad spectrum of issues for broker-dealers and firms. These issues include maintaining adequate supervision and providing marketing materials that properly disclose potential conflicts of interest. Contact our law firm to consult with one of our attorneys and to learn more about our law practice.

Perhaps a lesser-known business model for most of the investing public, life settlements involve the buying and selling of fractional interests in life insurance policies. Key to the offering of this investment is the insured's life expectancy, as well as the terms and conditions of the insurance policy.

In this matter, the SEC complaint alleges that three of the company's executives - the chairman and CEO, the president and general counsel and the chief financial officer -- " 'misled shareholders by failing to disclose a significant risk to Life Partners' business: the company was systematically and materially underestimating the life expectancy estimates it used to price transactions.' " These estimates are significant because if they are consistently inaccurate, the company's revenues and profits are likely to be adversely impacted.

The SEC also alleges that the company and its executives engaged in disclosure violations. They are also alleged to have engaged in improper accounting practices, which resulted in an overvaluing of the company's assets while also making it seem to the public that the company had healthy earnings from brokering these life settlement transactions. The company's misrepresentations and disclosure failures in its SEC public filings are alleged by the agency to have constituted a material risk to the company's revenues, which was detrimental to its shareholders and the investing public.

A major factor in this was the use of an allegedly unqualified individual to perform the actuarial work needed to estimate life expectancies, which were consistently shorter than they should have been. According to the complaint filed by the SEC, the shortened life expectancy valuations resulted in the use of material non-public information that generated revenues to the public's detriment. The person performing this function was not an experienced life expectancy underwriter and was told simply to use methodologies that had been established by a former underwriter that had worked for the company. The use of unqualified experts in a core valuation that is critical to a company's health, presents a risk to the investing public.

New York City's Gusrae Kaplan Nusbaum PLLC, represents firms and broker-dealers before all regulatory agencies. Please contact our law firm for a confidential consultation with one of our lawyers regarding representation and our litigation and advisory practice. Our highly-respected lawyers have decades of experience and expertise representing firms and broker-dealers.

One major area of focus this past year for FINRA has been its securities firm examination program. Several key reforms were made to "better detect potential fraud and to focus on areas of risk." To this end, FINRA conducted more than 3,050 examinations in 2011 and deployed the resources needed to accomplish these examinations. For example, matters that pose the most risk to investors are now designated as urgent, with resources allocated to expedite the review of these matters. One area in which this has been evident is in the staffing of district offices, which has increased to manage the push for greater real-time monitoring.

As noted in our last post, branch-level examinations are increasing, as are point-of-sale examinations. The shift this past year included greater time in the branch offices for FINRA staff -- another way in which resources were allocated in a different way than they have been in the past. This is borne out by the numbers, as FINRA reported an increase of 350 more branch office exams than in the past year. This is a significant increase that is likely continue into 2012.

Another major area of significant expansion for FINRA was in equity markets regulation. FINRA took over the primary surveillance of the NYSE's equity and options markets, and according to the agency its collection of data is now accounting for 80 percent of volume across the NASDAQ and NYSE.

New developments for 2012 include the creation of comprehensive cross-market surveillance patterns which will be evaluating trading activity across these markets simultaneously. According to FINRA, the "consolidation of market data for integration into new cross-market surveillance patterns will help FINRA identify problematic trading activity more quickly." The intention is to "detect improper conduct" as soon as possible and then take steps to stop it from continuing. In addition, the NYSE's Order Tracking System is essentially being replaced as FINRA has now expanded its tracking systems to meet its cross-markets surveillance responsibilities.

Arbitration panel composition was another area of change for FINRA, with nearly 4.400 arbitration matters filed last year. As we posted last year, FINRA's new arbitration rule made it possible for customers with three panel arbitrations to have those panels comprised of only public members. This was intended to support the public's confidence in the arbitration process.

Finally, FINRA notes that its Investor Education Foundation issued investor alerts on a number of topics. We have posted information about some of these alerts this past year, which are intended to educate the public on various issues, including potential scams and high-risk investments.

The New York firm of Gusrae Kaplan Nusbaum PLLC represents firms and broker-dealers in regulatory and enforcement matters. Our lawyers advise our industry member clients in matters involving a broad spectrum of issues before all regulatory entities. Contact our law firm to consult with one of our attorneys.

Advising and representing broker-dealers and firms, the lawyers of the Securities Lawyer Blog are well aware of the proactive regulatory and enforcement environment. FINRA's numbers are noteworthy. In the area of disciplinary actions for example, FINRA brought over 1400, involving both firms and registered individuals. The fines resulting from these amounted to over $63 million. Restitution to investors amounted to over $19 million.

The Securities Lawyer Blog has also posted throughout the year on expulsions and suspensions that have resulted from various enforcement actions and settlements. FINRA notes that its numbers are up from 2010 in this regard, with the suspension of over 430 brokers and the barring of nearly 320 individuals from association with regulated firms. The agency reports that it expelled 17 firms from operating within the securities industry.

The year-end review for FINRA's Office of Fraud Detection and Market Intelligence (OFDMI) included referrals to other regulators in over 600 matters. The breakdown of those referrals between federal and state regulators and law enforcement is not delineated in FINRA's statistics.

Coordinated efforts with the Securities and Exchange Commission in the area of real-time surveillance is noted to have made it possible for the OFDMI to expedite matters that involved potential fraud and insider trading. Nearly 640 matters were referred out by OFDMI for further investigation when real time surveillance pointed to potential issues. These matters were referred to various enforcement agencies, including the SEC, state and federal agencies.

Over the year, the Securities Lawyer Blog has also kept our readers informed of the many matters involving firms and broker-dealers in the area of retail product promotions and unsuitability issues involving structured products. FINRA notes that it has been very active during the year highlighting its activities in the area of 'sales practice violations" that include a broad spectrum of issues, such as "misrepresentation, material omissions, unsuitable recommendations, and inadequate supervision and training in principal-protected notes, reverse convertibles and subprime investments."

We will continue the year-in-review with the area of examinations and market regulation in our next post. The lawyers of New York's Gusrae Kaplan Nusbaum, PLLC are pleased to bring our readers the Securities Lawyer Blog. Please contact our New York or Florida offices to learn about our law practice and speak with one of our highly-experienced attorneys.

We wish you all a good and productive year in 2012.

The matter involving Barclays which was settled for $3 million, centered around allegations that the firm misrepresented delinquency data with regard to certain investments and provided inadequate supervision with regard to their offering and sale. The Securities Lawyer Blog has posted on other matters in the recent past involving failures to adequately supervise as alleged in regulatory and enforcement actions.

The Barclays matter and settlement involved the issuance of residential subprime mortgage securitizations (RMBS). FINRA alleged that for a period of about three years, from 2007 through 2010, the firm allegedly misrepresented the historical delinquency rates for certain subprime RMBS that it offered. Noting that "historical delinquency rates are material to investors," both in assessing RMBS value and potential future returns based on the potential for mortgage payment failures, the firm allegedly misrepresented these rates for three of the RMBS underwritten and sold by Barclays.

Specifically, FINRA claimed that the firm posted delinquency data on its website that was inaccurate. The errors in this historical information was said to have been significant, so much so that it could impact investor's ability to evaluate the investment value and "subsequent securitizations."

The issue related to supervision involved FINRA's allegation that the firm did not have in place a system that would ensure that its website disclosures were maintained and updated. Without supervision of these critical components, the delinquency data could well be inaccurate, making it difficult if not impossible for investors to assess future RMBS investment performance.

The matter involving Wells Fargo, which was settled for $2 million, involved alleged activities with regard to one broker and 21 of the firm's customers. The firm was alleged through this broker to have provided "unsuitable sales of reverse convertible securities." In addition, it was also alleged that customers eligible for sales charge discounts on Unit Investment Trust (UIT) transactions were not provided those discounts. Under the settlement, these customers will now be given restitution for the non-payment of discounts and the unsuitable transactions.

FINRA also filed a complaint against the registered representative who was alleged to have been involved in the recommendation and sale of unsuitable reverse convertibles. He was also alleged to have been involved in dealing improperly with customer accounts, including deceased customers, and making unauthorized trades. These investments were recommended to the very elderly (many over the age of 80) and low-risk tolerance investors and were held in disproportionately high concentrations in these accounts.

The lawyers of Wall Street's Gusrae Kaplan Nusbaum PLLC, are experienced advisors to firms and broker-dealers in all areas of compliance and representation. Contact our law firm for more information on our wide range of services, including regulatory and enforcement representation, broker-dealer advisory services and securities litigation. We are a firm comprised of experienced former senior level regulators and securities and compliance litigators, providing advisory and litigation services and representation before all regulatory agencies.

The trader was alleged to have violated requirements of Regulation SHO -- which the Securities Lawyer Blog has highlighted in past posts. In this case, the trader was ordered to cease and desist from violations of Rules 203(b)(1) and 203(b)(3) of Regulation SHO.

Specifically, the "locate" and "close out" requirements were said by the SEC to have been violated. These provisions require that before selling short, traders locate a source of borrowable shares. The shares must be deliverable by a date certain and only those market makers engaged in bona-fide market making in the excepted security are permitted to operate under the exception.

In this case, the allegations center on the SEC's conclusion that this particular trader used the "market maker exception" improperly. His business loaned certain stocks to broker-dealers that are generally "hard-to-borrow." Those broker's customers received locates and stock loans on those shares. The stock provided was actually not available for delivery, which amounted to illegal naked short sales that were effectuated between late 2006 to June 2007.

As noted by George S. Canellos, Director of the SEC's New York Regional Office, the Commission intends to aggressively " 'pursue and punish abusive short sellers who attempt to circumvent regulatory requirements to make more money.' " The trader in this matter was alleged to have "avoided the cost of borrowing shares while engaging in complex short selling transactions," which resulted in great profits, lower risks and advantages over legitimate market participants.

Delineating two types of transactions in the alleged practices, the Commission's allegations centered on a "reverse conversion" or "reversal" in which stocks are sold short with a simultaneous put option sale and a call option buy. The other transaction involved a sham that combined stock-and-option transactions that created "the illusion that the party subject to a close-out obligation has satisfied that obligation by buying the same kind and quantity of securities it has sold short."

The trader sought to create an appearance of Regulation SHO compliance when in fact the shares purchased were not delivered. This naked short selling practice meant that the trader and his former firm failed to deliver shares resulting in what the Commission noted as "persistent 'fail-to-deliver' positions." The attempt to take advantage of the market maker exception to Regulation SHO was improper since in fact these parties were not involved in bona-fide market making with the securities they traded.

Gusrae Kaplan Nusbaum PLLC represents broker-dealers in regulatory and enforcement matters. Establishing policies and procedures designed to comply with all regulatory requirements is critically important for industry members. Our lawyers include highly-experienced former regulators and experienced litigators that help our clients with all aspects of securities laws, rules and regulations. Please contact our New York law firm to consult with one of our attorneys at any time.

On the other hand, staff has identified various common deficiencies in branch inspections, which include: failing to tailor the examination procedures based on the business itself or the underlying risk assessment; using examiners who are not sufficiently experienced to fully understand the business or to effectively challenge assumptions; performing cursory exams that are generic; failing to adequately review the exam program itself for effectiveness and following existing policies and procedures; announcing exams when they should have been unannounced; failing to focus on individuals with a history of disciplinary issues and applying more supervision with those individuals.

Other suggested approaches to ensure compliance and effectiveness are also identified in the guidance issued jointly by the agencies. One important area is analyzing the risk to support the evaluation as to whether certain branches should be inspected more often than required within the FINRA three year cycle. Additionally, engaging in unannounced re-audits is a suggested practice when varying degrees of deficiencies are found. Circling back to branch office managers with the firm's internal inspection findings with monitoring of corrective measures within the branch is also suggested.

The Wall Street law firm of Gusrae Kaplan Nusbaum PLLC provides legal counsel and representation to firms and broker-dealers in establishing and maintaining proper supervisory systems and all related compliance with FINRA and SEC rules and regulations. Please contact our law firm to discuss our advisory services and representation by lawyers with expertise and experience before all regulatory agencies and courts in the field of securities law.

In Judge Rakoff's words, the firm "dump[ed] some dubious assets on misinformed investors" and the settlement was reached before sufficient facts had been brought to light about the funds set up for the CDO's. He said that without "cold, hard, solid facts" to satisfy the public's interest, he could not approve the settlement.

The consent judgment would have resolved the matter. The SEC's agreement with the firm was to require it to return profits, interest and penalties in the amounts of $160 million, $30 million and $95 million, respectively. The firm was also putting into place various measures that would require a more stringent review and accountability for investment worthiness and related public statements.

In his opinion, the Judge stated that the enjoining of future violations was not sufficient and that the United States Supreme Court has held the public interest must be considered in the issuance of permanent injunctive relief. He concluded that the "proposed consent judgment is neither fair, nor reasonable, nor adequate, nor in the public interest."

Both the SEC and Citigroup issued statements about the opinion, with which Citigroup said it "respectfully" disagrees. The SEC's said its focus was not so much on the need for an admission of wrongdoing, which the Judge found lacking, but rather in the the disgorgement, penalties and reforms that would be forthcoming and avoid both the risk and expense of trial.

Citigroup said it had begun making the reforms that were agreed to and that the court's decision was not aligned with similar precedent. Other federal courts had approved similar settlements in major CDO cases. If the case were to go to trial, Citigroup's spokesperson noted that they will present substantial legal and factual defenses.

The Securities Lawyer Blog will keep you posted on the next developments in this matter.

The lawyers of Gusrae Kaplan Nusbaum, PLLC advise broker-dealers and firms in all aspects of securities regulation and compliance, as well as representation before all tribunals and agencies. Please contact our law offices for more information on representation and our securities litigation practice.

The settlement was reached with Chase Investment Services Corporation (Chase) for $3.6 million in reimbursements and fines with regard to the sale of UIT's. Brokers who were part of what was WaMu Investments, Inc., acquired by Chase two years ago, were also alleged to have been involved in the sales activities that led to this matter. Customer losses were said to have resulted from the alleged sales recommendation of various investments that were later determined to be unsuitable.

The investigation by FINRA centered on the recommendations brokers of the firm made with regard to UITs and floating rate loan funds. It was said that these customers were not only unsophisticated, but had conservative risk tolerances and that due to these factors, reasonable grounds for the recommendation.

Suitability with regard to higher risk investments has been a major issue in enforcement, especially since the financial crisis began as losses have become more common. One of the main issues in this matter was FINRA's contention that the firm "failed to implement supervisory procedures" that would have ensured the supervision of the sales of these higher-risk investments.

The investors involved in this matter were those with little or no investment experience. It was alleged that the firm's brokers recommended these investments to about 260 customers.

Specific investments on Chase's list of approved products included those with many assets that were held in closed-end funds with high-yield or junk bonds. FINRA concluded that due to the investors lack of experience and to the obligation to determine suitability of higher risk investments for conservative risk customers, the firm had failed in its obligations in this regard as these customers invested outside their risk tolerance. These customers sustained losses of about $1.4 million in what were deemed to be unsuitable investments.

Other customers suffered losses of about $500,000 in risky, potentially illiquid and high credit risk floating rate loan funds. These customers also had conservative risk tolerances. Although these customers sought preservation and liquidity, the investments were recommended.

New York City's Gusrae Kaplan Nusbaum PLLC, represents broker-dealers in all aspects of compliance -- counseling them in their programs and policies and before all industry regulatory agencies. Please contact our law firm for a confidential consultation with one our lawyers regarding representation and our litigation and advisory practice. Our highly-respected, preeminent lawyers have decades of experience and expertise representing broker-dealers.

A strongly worded announcement made it clear that the SEC believes it has strengthened its enforcement work after a reorganization that occurred in 2009 and 2010. Referring to the financial crisis and its repercussions, SEC Chairman Mary L. Schapiro noted the agency's " 'unmatched record of holding wrongdoers accountable and returning money to harmed investors.' "

The SEC's announcement comes at the end of the first year of enforcement since the reforms were put in place. The $2.8 billion in penalties and discouragements in the 2011 Fiscal Year are the highest in the agency's history.

Robert Khuzami, Director of the SEC's Division of Enforcement described the accomplishment as "remarkable" going on to point out the " 'talent, grit, and determination of the staff, as well as their creativity and willingness to consider new tools and approaches to stopping and deterring fraud and misconduct.' "

The statistics cited by the agency include actions involving C Suite members and senior corporate officers, individuals and firms involved in failed CDO offerings. Others involved related matters concerning subprime mortgage securities and related funds. The insider trading cases rose as well this past year. These cases targeted hedge fund managers and traders, as well as other individuals with access to do significant damage to firms, markets and investors.

Other matters included financial fraud and issuer disclosure violations, which once were the standard fare for the agency prior to the financial crisis. Overstating results and audit failures were the basis for some of these actions. In addition, there were notable cases brought against firms and individuals involved in allegedly fraudulent schemes that targeted vulnerable populations such as the elderly and the deaf, in an on-line solicitation.

Another major area of enforcement were actions against investment advisers and broker-dealers which included 146 enforcement actions which represents a 30 percent increase over the prior year. Broker-dealer enforcements were up by 60 percent in the prior year. These matters included allegations of misleading statements on fund performance, analytics tools (investment models) and misuse of client information on the part of firms and individuals.

When broker-dealers and firms need compliance advice and representation, they turn to securities law experts with significant experience with regulatory agencies. New York's Gusrae Kaplan Nusbaum, PLLC, is a securities law firm comprised of former regulators and experienced securities compliance practitioners immersed in the field of securities law & regulation as well as advisory counsel to broker-dealers for compliance and representation before all agencies. Contact us for representation or more information about our law practice and our lawyers.

The allegations of the SEC's complaint include charges that the firm misled investors regarding many aspects of its business, including where the funds raised were actually being placed, in this case, allegedly into the money manager's personal bank account.

The purported hedge fund was the magnet to which potential investors were attracted, but according to the SEC, the solicitation was fraught with misleading information that included false statements. These included that: the principal graduated from Harvard University with both undergraduate and graduate degrees; that he worked for a major global investment company in which he grew and managed billions of dollars; that a major auditing firm served as the purported fund's auditor; and that the firm was a British Virgin Islands company.

The SEC's allegations include that by creating the "indicia of legitimacy" using misrepresentations, the principal had ten investors that may have put up at as much as $1.7 million. Some of this was placed into the principal's personal accounts.
The SEC says both the Swiss Financial Market Supervisory Authority and the British Virgin Islands Financial Services Commission has assisted in the matter, which remains under investigation. Both these entities are involved in regulatory compliance, supervision and inspection of financial services businesses operating within their jurisdictions.

The alleged violations in this matter include those under Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8.

The New York law firm of Gusrae Kaplan Nusbaum PLLC represents broker-dealers and firms in matters involving a broad spectrum of issues before all regulatory entities. Please contact our law firm to consult with one of our attorneys in any matter related to securities regulation and compliance, broker-dealer services and representation before all entities involved with the regulation and compliance of the securities industry.

Among other things, Reg SHO provides for specific requirements for broker-dealers in short sale transactions. FINRA alleged that in the UBS matter, the broker-dealer's Reg SHO violations led to "millions of short sale orders" that were "mismarked and/or placed to the market without reasonable grounds to believe that the securities could be borrowed and delivered."

Specifically, since short sales involve the sale of securities that the seller does not own, Reg SHO protects the buyer in that it requires that the broker-dealer have reasonable grounds to believe the security involved in the short sale can either be purchased or borrowed at the time of delivery. The "reasonable grounds" must be present before the broker engages in the short sale and the broker should not accept the short sale order unless these reasonable grounds are present.

Under Reg SHO, broker-dealers are required to designate an equity securities sale as either long or short. It is intended to protect buyers from a potential failure of delivery of equity securities -- this is why the broker-dealer must secure and also document the "locate" information prior to the short sale.

Allegedly, UBS's supervision of these critical aspects of compliance with Reg SHO were lacking in that locates and marking of sale orders were not sufficiently monitored. This in turn led to Reg SHO failures in the firm's equity trading business which is the scenario that Reg SHO is intended to protect against.

Without locates at the time of the short sale order, the risk of failure is increased significantly. When selling securities that are difficult to borrow, this makes the likelihood even greater. That is one way in which FINRA alleged the UBS system was flawed. FINRA noted that the locate violations were found throughout the UBS system, stating that they "extended to numerous trading systems, desks, accounts and strategies."

The violations were also alleged to have extended to the firm's procedures and technologies, as well as its operations. UBS short sales orders were alleged also to have been mismarked as long, rather than short which violated the locate requirement in Reg SHO. UBS was also alleged to have had "significant deficiencies related to its aggregation units" which was suggested to have possibly resulted in the extensive order-marking and locate violations.

FINRA's investigation uncovered systems and a lack of supervisorial procedures for short sales in the UBS system prior to 2009, which it has had an opportunity to correct and redesign to ensure compliance with Reg SHO in the future.

Gusrae, Kaplan & Nusbaum, PLLC represents broker-dealers in regulatory and enforcement matters. Establishing policies and procedures that are designed to comply all regulatory requirements is critically important for broker-dealers. Our lawyers include highly-experienced former regulators and experienced litigators that help our broker-dealer clients with all aspects of securities laws, rules and regulations. Please contact our New York law firm to consult with one of our attorneys at any time.

The civil penalties amount to close to $1 million. The firm has agreed to enforce internal trading guidelines to ensure compliance and avoid future violations.

BetterTrades' core business is in providing seminars, workshops and the sale of materials and software that are intended to instruct the trading of options, as well as the actual facilitation of options trading through their software products.

The SEC alleged that for a period of at least one year, instructors involved with BetterTrades misrepresented themselves as having great success in the sale of options and in the use of the products sold by the company to make these trades. In addition, the SEC alleged that the defendants allowed these claims to be made in marketing materials and infomercials, but that the accuracy of these claims was not verified by the company even after red flags arose. The company's president was represented as having created his own wealth through options trading and the company's software, rather than the company's operations which was, according to the SEC, the actual source of his wealth.

An important and valuable component of this settlement was the SEC's view of the remediation efforts which were made voluntarily by the defendants. The SEC took into account what they viewed as significant remediation steps which included the retention of counsel to review the manner in which the company sells and promotes the classes it offers, adoption of various standards and policies to ensure proper behavior on the part of the company's instructors and mandatory training of the instructors with regard to those policies.

Other efforts that impressed the SEC were retention of traders' records, review of traders' claims of success and more careful vetting of these claims. DIsciplinary actions taken by the company against non-compliant instructors were also part of the voluntary remediation.

Remediation and / or compliance programs established with the support of experienced securities counsel are part of New York's Gusrae, Kaplan & Nusbaum, PLLC significant securities law practice on behalf of broker-dealers and other entities. Please contact our New York or Florida offices to learn about our law practice and speak with one of our our highly-experienced attorneys.

Using this important credit tool, families will also benefit from expanded financial information through the Foundation. A number of educational videos are being produced and will be available to members of the National Guard and their families. The first such video has just been released and will be made available to members. This particular video provides information about avoiding fraudulent investment schemes. This material will help members not only manage finances, but also stay away from fraudulent investments that might otherwise require more research time than members can afford. Military spouses will also receive training as financial counselors.

The Military Financial Education Project was launched five years ago to help military families deal with the challenges they have in managing their finances while they are on active duty and deployments. The resources provided by the Foundation and its projects are intended to help these families manage their finances without the additional expense of paying for private investment counseling.

This project allows service members to use myriad resources on line through the website, www.SaveAndInvest.org as well as to educate them on finances and savings. The stress these families are under given the nature of the work they do makes household management more and more challenging. The resources provided by FINRA are an important way of supporting our military families. As noted by the President of the FINRA Investor Education Foundation, Gerri Walsh " '[w]e believe providing the right tools for military families can enhance their financial readiness and relieve some of the stress families feel when it comes to managing household finances.' "

The programs for military families include not only the additional free FICO® Scores, which are available through service members' military financial educators, but many other efforts as well. Another important endeavor is the training of military spouses to become Accredited Financial Counselors. This program is in partnership with the Association for Financial Counseling and Planning Education® (AFCPE®) and the National Military Family Association. This year, there were 200 military spouses who received fellowships to become accredited and commit to two years of counseling military families with financial issues.

The New York City securities law firm Gusrae Kaplan Nusbaum PLLC, dedicates its practice to and specializes in securities and commodities litigation, regulatory and enforcement representation, broker-dealer advisory services and related representation. Please feel free to contact our offices at any time to speak with one of our experienced lawyers.