Today, over 46 million Americans are 65 years of age or older. This accounts for nearly 15% of the population. According to the Population Reference Bureau, that number is projected to more than double by the year 2060. It will reach an estimated 98 million and 24% of the U.S. population. Approximately 1 out of every 10 Americans, age 60 and older have experienced some form of elder abuse. Estimates of financial elder abuse and fraud costs range from $2.9 billion to $36.5 billion annually

On Thursday, February 21^st, Pasieczny Law LLC attorneys Victoria Blachly and Darlene Pasieczny will speak to the Oregon State Bar Securities Regulation Section about financial elder abuse in the securities industry. Their program “Recent Tools to Combat Financial Elder Abuse: Mandatory and Permissive Conduct Under FINRA Rules and Oregon Law for Securities Professionals,” will take a closer look at Oregon statues and FINRA rules regarding mandatory and permissive conduct for brokers and investment advisers when there is reasonable suspicion of financial abuse.

Meet the experts – Victoria Blachly and Darlene Pasieczny

Victoria Blachly is a fiduciary litigator, licensed in Oregon and Washington. She represents individual trustees, corporate trustees, beneficiaries, and personal representatives in often difficult and challenging cases including:

• Trust and estate litigation
• Will contests
• Trust disputes
• Undue influence
• Capacity cases
• Claims of fiduciary breach
• Financial elder abuse cases
• Petitioning for court instructions
• Contested guardianship and conservatorship cases.

Darlene Pasieczny is a fiduciary and securities litigator. She represents clients both in Oregon and Washington, with matters regarding trust and estate disputes, financial elder abuse cases, securities litigation, and represents investors nationwide in FINRA arbitration. Her article, New Tools Help Financial Professionals Prevent Elder Abuse, was featured in the January 2019, Oregon State Bar Elder Law Newsletter.

Report abuse

If you suspect someone is being abused, neglected, or financially exploited, please reach out to the Oregon Department of Human Services. Also, you may consider hiring a private attorney to help employ legal tools to prevent harm, or recover financial losses.

Current cryptocurrency regulation and cryptocurrency investment regulation can be summed up in one phrase:  Regulation by Enforcement.

I moderated a great panel presentation this weekend on Cryptocurrency Investments, Supervision and Securities Regulation at PIABA’s mid-year CLE event in Los Angeles on May 5, 2018.  We discussed the current state of regulation as well as the nuts-and-bolts of blockchain technology: everything from Bitcoin, the basics of utility tokens, security keys, and even ranging into CryptoKitties.  Our audience included securities attorneys, law professors, and representatives from the Financial Industry Regulatory Authority (FINRA).  I was joined by Professor Benjamin Edwards (William S. Boyd School of Law, University of Las Vegas, Nevada), securities attorney and former SEC Enforcement officer Celiza Braganca (Braganca Law LLC), and industry expert Louis Straney (Arbitration Insight LLC).

Most securities professionals that I’ve talked with consider cryptocurrency investments the Wild West in terms of regulation and safeguards (minimal to none) for the investing public.   The North American Securities Administrators Association (NASAA), the association of state securities regulators, would agree.

Accumulating SEC enforcement actions and reports like the “DAO Report,” Release No. 81207 (June 25, 2017), are the current guides that issuers and industry participants have for what to do, or not do, so that an Initial Coin Offering (ICO) or Initial Token Offering (ITO) complies with existing federal and state securities laws. This kind of “regulation by enforcement” leaves industry participants guessing at what they can do as the technology changes.   And, the SEC and state securities regulators are by no means the only regulatory bodies overlapping with enforcement.  The Internal Revenue Service, FinCen, the CFTC, criminal law, and private class actions are all taking their pound of flesh from industry participants.   FINRA’s 2018 Regulatory and Examination Priorities Letter notes that the SRO will be keeping an eye on developments with ICOs and the supervisory and compliance mechanisms that brokerage firms have put in place for compliance with securities laws and FINRA rules.

But, since December, 2017, the US Commodity Futures Trading Commission (CFTC) has allowed cryptocurrency futures contract trading on the Chicago Mercantile Exchange.  Goldman Sachs recently announced that it will open a Bitcoin trading desk, and now the New York Times reports that the parent company of the New York Stock Exchange, Intercontinental Exchange, has been working on an online trading platform for large investors to buy and hold Bitcoin.   The confidence of these institutions may lead the market in another round of soaring blockchain hype and eager investors buying in … to what?

Warren Buffet made his feelings about clear when he called Bitcoin “probably rat poison squared” in an interview with CNBC over the weekend.

If a FINRA-licensed broker or SEC-licensed registered financial advisor makes recommendations for a customer to buy cryptocurrency investments, it could be a big red flag for a compliance department.  SEC Chairman Jay Clayton has basically said that he thinks all cryptocurrency-related investments are securities.  But the SEC hasn’t issued specific cryptocurrency regulations, and it seems to be relying on shutting down unregistered ICOs and ITOs to create a regulatory roadmap.  Do those offerings sound like Initial Public Offerings (IPOs)?  You are correct, that’s on purpose.  But, importantly, unlike an IPO, you get no ownership interest when buying into an ICO or ITO. There’s no there, there. Unfortunately for investors duped into participating in a fraudulent cryptocurrency offering or hacked offering, the likelihood is that your money is halfway around the world and difficult to recover from the issuer.

I suspect the future of cryptocurrency regulation will include increased claims for participant liability under state securities laws that offer broader investor protections than those provided by federal law.  Attorneys and accountants assisting issuers in these fraudulent offering should be held accountable under appropriate circumstances.  I bring participant liability claims under state blue sky laws to recover investment losses for individuals and groups of individuals.  And, if financial advisors are actively making purchase recommendations to clients otherwise unwilling to take on high risk, speculative investments, there could be viable FINRA arbitration claims against the brokerage firms that allow their brokers to make irresponsible, unsuitable recommendations.

If you have concerns about how your money is being handled by your financial professional, or concerns that you or a loved one might be the victim of financial exploitation, call me at (503) 358-8292.  Consultations are free, and confidential.

The Chief of Enforcement at the Division of Finance and Corporate Securities Consumer & Business Services Department (DFCS), Van Pounds,  was both quoted in Molly Young’s recent Oregonian article about high return investments and Salem investment adviser Kevin Winder.  Winder lost his license for selling promissory notes to clients in businesses in which he had a personal interest. Misrepresenting investments is not a new storyline, but it is uniquely tragic for every new set of victims. You can read the full story here.

Use Caution When Advisors Recommend Alternative Investments With High Return Rates

As a general rule Banks says, “If you can’t sell your investment at will, and you can’t find out its true value on any given day, then you should avoid it. Some private investments are certainly legitimate, but so many of them involve far more risk than the investor understands. Don’t risk it unless you really understand the potential for loss.”

Investor Defender attorney Darlene Pasieczny represent investors in securities industry disputes in FINRA arbitrations across the U.S. The Investor Defenders at Pasieczny Law LLC know the rules, and we fight for our clients in recovering investment losses. Contact us at (503) 358-8292.

This is not  the first time that LPL has been in the news for problems with REITs. In March of 2013 Investment News reported that the Montana State Auditor’s Department was concerned with the sale of REITs to unsophisticated investors. The New York Times collaborated the story and also questioned LPL’s broader compliance efforts.

We applaud The New Hampshire Bureau of Securities and the Montana State Auditor’s Department for taking action, and wish other state securities regulators would do the same.  Unfortunately, the New Hampshire action can only benefit New Hampshire investors. Our firm has successfully represented investors nationwide in claims against LPL Financial and other firms selling non-traded REITS, both in court and in the FINRA arbitration process. Our claims have most commonly been based on the fact that our clients were not told that the REITs and other so-called alternative investments they were sold could not be sold in the public market, and were laden with undisclosed fees. We continue to investigate firms that sell these products and welcome calls from investors with questions about their investments that they cannot sell.

Investor Choice. Since 1987, when the Supreme Court decided McMahon v. Shearson Lehman Brothers, investors have been denied their Constitutional right to a jury trial. Instead, if they have lost money through the fraud or negligence of a FINRA-licensed stockbroker, financial advisor or brokerage firm, investors are required to bring their cases through the FINRA arbitration process. Although we have seen benefits for many of our clients in using the FINRA arbitration forum over the last 23 years, some cases are better resolved in court by a judge and jury. Investor Choice simply allows investors to choose between FINRA arbitration and court. Congressman Ellison from Minnesota has introduced the Investor Choice Act, which would give investors that choice. There is no legitimate reason for barring investors from the courthouse doors. Congress should side with individuals and not with Wall Street firms. Call your representatives and urge them to support Investor Choice!

Uniform Fiduciary Standard. A fiduciary standard requires nothing more than putting the investor’s needs ahead of the brokerage firm. That is what investors expect from a financial adviser, and that is what brokerage firms claim to provide. But, that is not what happens in reality. PIABA prepared and distributed to Congress and the press a compelling report that collected advertisements of brokerage firms, all of which declare that they put investors first. When those same firms face FINRA arbitration claims from investors for mismanagement and fraud, however, they deny that they owe any fiduciary obligations to their clients. The PIABA report includes specific examples of the defenses that the firms file. We see the same tired defense routinely raised when we include claims for breach of fiduciary duty. The Wall Street firms claim that their only obligation is to make “suitable” investment recommendations.

What’s the difference between a suitability standard and a fiduciary standard?

Commissions and fees. A suitable investment must be in line with an investor’s investment objectives and risk tolerance levels, but it need not necessarily be in the investor’s best interest. Say that there are two mutual funds, each consisting of a similar broad mix of stocks and bonds. One charges the investor a 3% commission and the other 1%. Under the pure suitability standard, the financial advisor may be able to recommend only the higher commissioned product, even if he is fully aware of the lower cost fund and it is readily available. Under a fiduciary standard, he could not. Does that matter? It does. The White House issued a report recently that explained that even a 1% difference in commissions results in many thousands of dollars in the value of a retirement account over time. Jason Zweig, an insightful columnist on investor issues at The Wall Street Journal, has made similar observations. Currently, registered investment advisors are held to a fiduciary standard, but financial advisers who work at a brokerage firm are not, at least under federal law.   Investors don’t know the difference between investment advisors who are registered with the SEC and financial advisors who are FINRA licensed.  And, practically speaking, there is no difference. Both provide investment advice to their clients. SEC Chairperson Mary Jo White and the White House have stated that we need a uniform federal fiduciary standard for all advisers, whether they are FINRA licensed or SEC registered. PIABA agrees, and I agree. You should too. The claims of the financial services industry that a fiduciary standard would prevent middle class Americans from getting financial advice is bunk. Many states, including Oregon and California, already impose fiduciary obligations on advisers that advise their clients on what investments to make, and investors in those states get the same advice and service as investors in non-fiduciary duty states.

In 2013, the Dallas Court of Appeals held that life insurance contracts were investment contracts under Texas law. Life Partners appealed the decision to the Texas Supreme Court.

In the Supreme Court, Life Partners heavily relies on the Supreme Court’s decision SEC v. W.J. Howey. In Howey, the Court held that one requirement for an “investment contract” is that profits must be derived from the significant efforts of others. A life insurance insurance contract, according to Life Partners, does not meet this criteria because the promoter does not “take specific efforts after the sale of an investment to enhance the investment value.”

NASAA argued in its amicus brief that Life Partners’ interpretation of Howey is overly rigid. The reality is that investors rely on Petitioners’ expertise in selecting, evaluating, and pricing life insurance policies. Further, investors rely on the Petitioners’ services in making on-going premium payments and collecting the insurance benefits after a policyholder’s death. Thus, life insurance contracts meet the criteria for an investment contract stated in Howey.

NASAA also correctly pointed out “over the last fifteen years, there have been widespread problems in the sale of Life Settlement Contracts, and as a result, thousands of investors have lost significant amounts of money.” If Texas intends to prevent these problems in the future, it would be a mistake to exclude life insurance policies from regulations – including registration and disclosure requirements – under the Texas Securities Act.

Robert Banks, a nationally recognized securities attorney, has represented clients in lawsuits involving the sale of life settlement contracts and viatical settlements around the nation for many years. Our firm has seen fraud in these transaction, including opinions from persons masquerading as physicians representing to investors that an insured has a short life expectancy, when in fact they are middle-aged and have no life-threatening illnesses. Investors should know that the commissions earned by brokers in these transactions can be astronomical.In one of our pending cases, the brokers earned more than $225,000 on the sale of a life insurance policy that paid the insured selling the policy only $780,000.

Please contact our office immediately with any questions or concerns you might have regarding your investments. One of the biggest problems people have when trying to recover a loss is that they waited to long to get help.

Attorney Robert Banks gave a presentation on the fiduciary standard to a group of attorneys and advisers and you can read about that here. The CFA survey questions are similar to questions we might ask clients when they call our office:

• Has your financial adviser recommended retirement investments that you did not FULLY understand?
• Do you FULLY understand all of the costs that you are paying for the products that your financial adviser recommends?
• Has anyone explained how to read your statements? Do you really understand them?
• Has your financial adviser boasted that the retirement investments he or she recommends can “beat the market”?
• Has your financial adviser encouraged you to buy a variable annuity or equity-indexed annuity within an IRA?

If you want answers to questions like these, or if you have other concerns about advice you received, we encourage you to share your story with the Consumer Federation, and contact Pasieczny Law LLC if you have questions about a particular investment loss in your account. Robert Banks has been representing investors for more than 32 years.

Banks Law Office, P.C. has a long history of working with FINRA on many projects to improve the FINRA securities arbitration forum. Mr. Banks served on the National Arbitration and Mediation Committee for 8 years, was the chair of FINRA subcommittees, and chaired FINRA’s Arbitrator Training Task Force and Discovery Task Force. In all of those capacities, Mr. Banks worked closely with both Ms. Fienberg and Mr. Berry on those projects. Banks Law Office represents investors in disputes with their brokerages, and represents individual brokers in disputes with broker-dealer firms.

FINRA requires that firms have supervisory systems and written procedures to supervise VA transactions. The Sept. 29^th complaint includes the following allegations:

• Inadequate supervisory systems and written supervisory procedures to supervise VA business,
• Inadequate supervisory reviews of VA deals,
• Failure to have registered principal review of VA’s before submitting the application to the insurer
• Failure to have surveillance procedures to detect inappropriate VA exchanges
• Failure to develop and document a specific training plan for supervisory review of VA deals to

According to FINRA’s report, variable annuity sales made up 16-20 percent of the firm’s total revenue during the period of review (Septermber 2009-May 2011).

Bob Banks has years of experience representing investors who were sold variable annuities that were misrepresented. These are extremely complex and confusing products and in our experience, even the brokers who have sold them often do not understand how variable annuities work.

• Credit rating agency reforms
• Prohibitions on financial firms betting against the securities they package
• Improved disclosure and oversight of the asset-backed securities market; and
• A joint rule-making with other agencies to limit bank compensation structures that incentivize risk

The 2008 financial crisis destroyed unsuspecting investors. Banks Law applauds and supports the Senators efforts to be sure that history cannot repeat itself. You can read the original press release here.

According to the Bloomberg article, Richard McCollam said that he and Kathy Tarr signed up as many as 500 customers, most from AT&T, and earned $1 million in commissions in the duo’s “best year.” McCollam also said, according to the article, that they recommended that clients put 60% – 70% of their money in variable annuities, and the balance would end up in non-traded REITs. A startling statement, given the unusually high sales commissions and operational costs associated with variable annuities and non-traded REITs. FINRA and other securities regulators have issued warnings to investors and brokers about variable annuities and non-traded REITs. In some states, including Oregon, variable annuity sales were the subject of enough investor abuse that the Oregon legislature changed the law to make variable annuities “securities” under the law, to help protect investors from abusive sales practices.

Robert Banks was quoted today in Investment News Daily commenting on a proposed rule that FINRA sent to the Securities and Exchange Commission on Monday. The rule would prevent FINRA members who settle claims brought by customers from asking customers to agree not to oppose a request to expunge (or erase, in non-legal speak) the filing of the claim from the broker’s public record. FINRA deserves credit for recognizing that the expungement of customer claims from a broker’s record — which occurs all too frequently — does a disservice to investors (by sanitizing FINRA’s brokercheck reports) and regulators alike. Unfortunately, this proposed rule is yet another attempt to stop the bleeding by applying a band aid to a gaping wound. Nothing in the proposed rule prohibits brokers from requesting expungements after they settle cases, and they will continue to do so. Likewise, nothing in the rule will change the fact that the only party who appears at most expungement hearings is the one seeking the expungement. So, the expungement hearings will continue, and they will continue to be one-sided affairs. And they will continue to be granted, because it is hard to lose an expungement hearing when you have no opposition. The proposed rule is not going to fix the problem.

FINRA has made sincere efforts over the last ten years to try to fix the expungement problem. None of those efforts has worked. It is time to get serious. There are better solutions. One is to prohibit the expungement of customer claims, and allow the affected rep to write his or her response to the customer’s complaint on their disclosure reporting page. As a part of this solution, it would be fair to have customer claims expunged if there have been no other complaints after ten years. Another solution is to change the expungement standard to a presumption that expungement should not be granted, and require the requesting broker to show beyond a reasonable doubt that the claim was factually impossible. The expungement award would have to describe the evidence presented that met the beyond a reasonable doubt standard. FINRA deserves credit for continuing to work to improve the process but serious problems require serious solutions. FINRA’s latest one isn’t.

For more than 30 years Banks Law Office PC has represented investors in FINRA arbitration and in court to recover money lost due to the misconduct of brokers, accountants, financial advisers, lawyers and other professionals. If you have concerns about your investment loss please contact our office for a confidential consultation about your options for recovery.

Pasieczny was commended for her work on PIABA’s SRO Committee, which monitors FINRA and SEC arbitration rule-making proposals that are of significant interest to the PIABA membership and investing public. With the approval of its Board of Directors, committee members research and prepare PIABA’s comment letters on proposed securities regulation rule changes.

Darlene Pasieczny’s practice at Pasieczny Law LLC focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice includes representing investors nationwide in investment disputes through FINRA arbitration.

The Senator also stated that he was “appalled” at a reported $51 million in arbitration awards granted to investors in 2011 that remains unpaid. “Investors are required to participate in FINRA’s arbitration program if they have a claim against their broker. If an investor successfully proves their claim but is never paid, the integrity of the entire system is threatened.”

Senator Markey’s letter can be viewed by clicking here

PIABA’s 2013 Expungement Study can be viewed by clicking here

Attorneys Robert S. Banks and Darlene Pasieczny are PIABA members with a combined experience of over 35 years in recovering investment losses nationwide.

Attorneys for investors will search for responsible professionals who should or could have known about problems with these dollars. The investor’s lawyers and accountants have some obligation to advise and care for their clients. They may be responsible for paying back some of the lost dollars.

This scenario is more common than people want to admit. Banks Law encourages all investors to follow FINRA guidelines for safe investing. Also, if you follow the recommendations of a financial advisor or broker, be sure to check first on FINRA’s brokercheck. And finally, if you have lost money in an investment and want to know if you might be able to recover the funds, please contact our office for a confidential and complimentary evaluation of your potential claim. You have nothing to lose by calling us to see if there is any chance of recovering your investment.

Robert Banks has been protecting investors from financial abuse and neglect for over 30 years. He files claims against brokers, financial advisors, accountants, lawyers, and brokerage firms to help investors recover their money. You need only read his biography to know that you have discovered the best of the best.