Customer Complaints Category Archives — Securities Fraud Lawyers Blog Published by Securities Fraud Attorneys

Are You Planning for Retirement or Are You Already Retired? Potential Problems To Consider Before Entrusting Your Retirement Assets to a Registered Investment Adviser

Published on: May 22, 2023 | by Savage Villoch Law, PLLC

Whether you are in retirement or are planning for retirement, you may consider working with a Registered Investment Adviser (RIA) to manage your retirement assets. RIAs offer professional financial advice and are bound by the fiduciary duty to act in your best interest. However, there are potential issues you should be aware of as you consider working with an RIA. Here is a list of 10 potential problems with entrusting your retirement assets to an RIA.

Misalignment of Interests: While RIAs are held to a fiduciary standard by the Investment Advisers Act of 1940, this does not entirely eliminate the risk of self-interest affecting an RIA’s advice. For instance, RIAs might favor only those investment products from firms that are paying significant commissions to the RIA for selling that product. This means there is a significant potential conflict of interest causing an RIA to recommend the same small set of investment products to every potential client.
Limited Product Offering: Many RIAs have a limited range of investment products due to affiliations with certain investment companies. This could mean you may not have access to the full spectrum of investment options that might be more suitable for your retirement needs.

Margin Accounts and Investors

Published on: April 10, 2023 | by Savage Villoch Law, PLLC

Margin accounts are a popular tool used by investors to amplify their trading power. However, margin accounts also come with increased risk, and it’s important for investors, particularly senior investors, to understand the responsibilities of their broker-dealer when trading on margin. In this blog post, we’ll explore the responsibilities of broker-dealers in margin accounts and what investors need to know.

A margin account is a type of investment account that allows investors to borrow funds from their broker-dealer to purchase securities. With a margin account, investors are able to leverage their trades by borrowing against the value of their portfolio. This means that investors can potentially earn larger returns on their investments but also exposes them to increased risk.

Broker-dealers have a number of responsibilities when it comes to margin accounts. One of their primary responsibilities is to ensure that investors understand the risks associated with trading on margin. This includes providing investors with a detailed explanation of how margin accounts work, the potential risks and benefits, and any costs or fees associated with trading on margin.

Artificial Intelligence Expanding Impact on Investing

Published on: February 6, 2023 | by Savage Villoch Law, PLLC

Artificial Intelligence (AI), as it develops capabilities far beyond ‘program trading’ has the potential to greatly impact the world of investing in the stock market. In the past decade, technology has advanced greatly, leading to its use in a wide range of industries, including finance. While there is still some uncertainty about how AI will impact the stock market, it is generally believed that it will bring about significant changes in the near future.

One of the biggest benefits of AI in investing is the speed and accuracy of decision-making. With the ability to process large amounts of data quickly, AI algorithms can analyze market trends and identify profitable investments much faster than human traders. In addition, AI algorithms can be programmed to avoid psychological biases that can negatively impact human traders’ decision-making. This could result in more rational and profitable investment decisions.

Another potential benefit of AI in investing is the ability to identify patterns in data that humans might miss. AI algorithms can analyze vast amounts of data, including financial data, news articles, and social media, to gain a comprehensive understanding of a company and its potential for growth. This can provide investors with a more accurate picture of a company’s financial health and future prospects, allowing them to make better investment decisions.

FINRA Orders Record-High Financial Penalty Against Popular Stock-Trading App, Robinhood

Published on: July 12, 2021 | by Savage Villoch Law, PLLC

On June 30, 2021, FINRA ordered an approximately $70 Million financial penalty against Robinhood Financial LLC, the highest such penalty ever levied by the regulatory organization.[1] Through its investigation of the firm, FINRA charged Robinhood with numerous violations which had resulted in significant losses to their customers. While Robinhood neither confirmed nor denied the validity of FINRA’s charges, they ultimately agreed to settle with these massive sanctions. [1]

FINRA noted three major violations from its investigation into Robinhood’s conduct and operations as a stock-trading app, each of which merited its own penalties.

First, FINRA found that Robinhood has pervasively and negligently provided false or misleading information to its customers. [1] This false information was circulated in spite of Robinhood’s core mission to “de-mystify finance for all” and “democratize finance,” and ranged from misrepresenting customer account balances and buying power, to erroneous communication about customers facing margin calls. [2]

FINRA Dispute Resolution Arbitration: An Investor’s Guide

Published on: April 26, 2021 | by Savage Villoch Law, PLLC

FINRA Dispute Resolution arbitration offers a fair and expedited dispute resolution pathway for investors looking to resolve a dispute with their broker or securities firm. The arbitration process works as an alternative to traditional litigation and operates completely independent of the court system. As a result, this process often allows parties to save on both cost and time in the process of resolving a dispute.

There are some situations in which FINRA arbitration is required, such as when a written agreement between the parties mandates it. In order to be eligible for FINRA arbitration, an investor must be seeking to file a claim stemming from the business activities of their broker or brokerage firm, and the event in question must have taken place within the last six years (in most states). [1]

Generally, FINRA arbitration allows an investor to seek either monetary or securities damages resulting from the business activities of their broker or brokerage firm. To get the filing process started, an investor must submit a Statement of Claim, a FINRA Submission Agreement, and related filing fees, all of which are available to view on FINRA’s website. [2]

Margin Investing with Robinhood – Do the Risks Outweigh Rewards?

Published on: April 12, 2021 | by Savage Villoch Law, PLLC

Margin investing offers the opportunity to super-charge investments, but it also holds quite a bit of risk. Recent market volatility has shed a light on some of these risks, particularly for users of app-based platforms like Robinhood.

Let’s consider an example of margin investing with Robinhood. An investor deposits $5,000 cash into a margin account, and Robinhood lends another $5,000 to allow the investor $10,000 worth of securities. The “margin” is the difference between the value of the securities and the loan from Robinhood. This type of investing increases both purchasing power and financial leverage. [1]

If the securities in the margin account increase in value, the investor has the opportunity for a higher profit than they would have had they invested $10,000 of their own.

GameStop Short Squeeze: Legal and Regulatory Implications?

Published on: February 1, 2021 | by Savage Villoch Law, PLLC

It has been a tumultuous week in the investment world, with rallies among a gaggle of unlikely stocks, spurred on by a group of even more unlikely investors – retail investors who have banded together on the popular social media site, Reddit.

As has been widely reported this week, when Reddit retail investors discovered that hedge fund managers were widely shorting GameStop, AMC, and others, they urged fellow users to begin buying up these stocks. This frenzy of investment activity resulted in a short squeeze, sending GameStop’s stock price soaring, causing hedge funds to incur huge losses on their short positions, and placing popular online trading platforms in a precarious financial situation. GameStop shares closed the week of January 25, 2021 up 400% in spite of market volatility and restrictions, and without any material change to the prospects of company.

But how did we get here?

Financial Advisers Fail (Again) In Protecting Individual Investors.

Published on: September 1, 2020 | by Savage Villoch Law, PLLC

The Wall Street Journal published an article by Jason Zweig and Andrea Fuller on August 31, 2020 explaining their analysis of how financial advisers fell short in meeting their obligations to disclose important information to individual investors like you.[1] The Wall Street Journal analyzed the filings made by investment advisers on the SEC Form CRS. The article and analysis revealed what seems to be disturbing lack of candor by investment advisers.

It is fundamental to full and fair disclosure that if an individual investor wants to know whether their financial adviser, or a financial adviser they want to hire, has any legal or regulatory problems, that this information is easy for an investor to obtain. To that end, the Securities and Exchange Commission (“SEC”) sought to simplify the process by which an individual investor can access this information. The result of the SEC’s efforts was the “Form CRS.” “CRS” stands for customer (or client) relationship summary.

This information has been available. However, for the average “Main Street” individual investor, the information was not easy to find. And when the customer complaint and regulatory history was found, the disclosures were difficult to understand. The Form CRS[2] was intended to address this complexity and difficulty through simplification. Thus, the SEC created what SEC Chairman Jay Clayton said in November 2018 would be a “clear and concise” document. I think they succeeded. Wall Street, however, failed.