What You Need to Know About Initial Coin Offerings

In certain instances, virtual currency offered in an ICO is considered a security. As such, it is subject to regulation by the SEC. The SEC closely monitors companies and firms engaging in initial coin offerings. If there is suspicion of fraudulent activity, the SEC will actually suspend trading operations to protect investors. If you are offered to invest in an ICO, the best thing you can do is to first check with the SEC on the offering’s regulatory standing. You can also research a company and evaluate the investment risks yourself. When researching a potential ICO investment opportunity, be sure to check:

• To make sure the company’s public records and reports are up-to-date
• Take steps to verify, to the best of your ability, that company information provided is accurate
• Research the company’s recent trading activity, check for suspensions with the SEC

Investor Resources

If you have more questions about investing in initial coin offerings, you can find out more here. The SEC’s EDGAR database provides extensive organizational and financial information for many companies. You can access that database here. If you believe you invested in an ICO under false pretenses or misleading information, call us to find out your investment recovery options.

What Does a Shortened Securities Transaction Settlement Cycle Mean?

The most obvious impact is that securities transactions will now be processed quicker. Investors need to be aware of this change, as it affects the amount of time they have to prepare for a transaction. Investors need to:

• Prepare and deliver securities certificates to broker-dealers one day earlier
• Be ready to pay for a transaction one day earlier

You will need to discuss with your broker-dealer exactly how your transaction will be affected, going forward.

What Transaction Settlement Cycles Are Affected?

This change applies to many common forms of securities investments, including:

• Stocks
• Bonds
• Municipal Securities
• Exchange-Traded Funds
• Some Mutual Funds

Investor Resources

For more details on how the shortened settlement transaction cycles will affect securities investing, check out the SEC’s order approving the new settlement cycle. If you have questions about how you can keep your investments protected, contact us today. Check out our full blog for even more up-to-date legal news and info!

The Federal Reserve recently announced that interest rate hikes likely, causing trading and investing to slow. Fed Chairwoman, Janet Yellen will most likely announce increases later this week, with several more expected throughout 2017. Rates will likely increase 0.75-1.00 percent, initially, according to a Reuters report. The Fed’s announcement considerably slowed the recent tech and industrial market rally Wall Street has been experiencing. Investors and securities traders are waiting to see how these increased rates will affect market holdings.

What’s the hype on the hike?

Fed Chairwoman, Janet Yellen, has been hinting that rate hikes should be expected for 2017. Economists use current and projected job growth as well as U.S. economic strength as determining factors in determining interest rate hikes. Recent reports on the U.S. Labor market indicate that the economy is able to sustain a series of interest rate hikes. Generally interest rate hikes correlate with a strengthening U.S. dollar.

Cause for concern?

While interest rate hikes typically indicate a strengthening economy, domestic and global political issues along with economic concerns at home and abroad have caused investors and trading experts to watch closely for the expected rate hike announcement. Despite a record-reaching post-election market rally, optimism has waned on Wall Street. Although traders and broker-dealers expressed excitement for expected deregulation under the Trump Administration, excitement has turned to anxiety under lack of policy detail. Also, despite a strengthening dollar, Reuters reports that gold prices have surged under uncertainty over European markets.

Investor Resources

Don’t let market wariness be an intimidater. The best thing you can do as an investor is be prepared. Savage Villoch, PLLC is here to serve our investor clients. If you have questions or concerns about how an expected rate hike will come into effect or want to learn more about protecting your investments, contact us today.

Reviewing Your Investment Brokerage Activity

• Watch for Red Flags
  • Unauthorized trades – Investors still have executive control over brokerage activity. Make sure to grant prior approval for all deals.
  • Frequent trading – Be wary of frequent trades and sales that don’t fit with your investment plan.
  • Excessive fees – Don’t be afraid to inquire about any irregular or excessive fees you receive on your statement. It is important to know
• Be Aware of Illegal Brokerage Activity
  • Churning – Churning is a term given to excessive broker-dealer trading. This occurs in order for broker-dealers to earn higher commissions. It is important to know that even excessive brokerage activity resulting in higher returns can still be considered churning.

Stopping Excessive Brokerage Activity

• Discuss Investment Goals – Discuss your investment goals with your broker-dealer. Make them aware of your expectations and needs.
• Discuss Activity with Brokerage Firm – If you are notified of excessive activity by your brokerage firm, discuss the investment plan that you made with your broker-dealer. Make sure you know if your broker’s actions are not in compliance with regulations.

Investor Resources

• Check your broker-dealer’s background by going to Investor.gov
• Submit a complaint to SEC or FINRA
• Contact Savage Villoch Law for questions on investment loss recovery

Equitable Securities Trading Over Efficient Securities Trading

The NYSE’s decision to expand floor trading comes in contrast to most securities brokerage firms decision to opt for electronic trading. Electronic trading’s automated exchanges make it an efficient means of trading. Through electronic trading, stocks and securities are distributed on a first-come-first-serve basis. Despite electronic trading’s popularity for providing fast trading solutions, it is not without its downsides. Critics say electronic trading creates an uneven playing field for investors. Beginning investors or ones with less access to electronic trading technology are out-paced by high-powered firms.

Accessibility for Investors

NYSE executives state their hopes to establish their trading floor as an accessible and equitable marketplace to trade and invest. In addition to the wider selection of securities available to investors, NYSE executives hope that expanded floor trading will reintroduce transparency into securities trading. While speed and efficiency are important components, sole reliance on those factors mean an increased risk of fraud. Conversely, investors must also be aware of risks associated with the increase in floor trading availability. Investors always need to make sure of performing due diligence before closing on any trade.

A Resource for Investors

Savage Villoch Law is here for our clients. If you have more questions on what this change means for securities trading or general investing questions, contact our expert team today and we will make it our goal to get answers for you.

Luring Investors with Day-Trading

The scammers lured investors with the low-risk nature of day-trading. By exaggerating low costs and fees and high leverage of day-trading, the phony firm managed to entice investors in more than 30 countries.

Targeting Inexperienced Investors

These scammers specifically targeted inexperienced investors in their scheme. Inexperienced investors are typically much more prone to investment scams. While no one should be intimidated by investing their finances, new and inexperienced investors should watch out for signs of fraud. Before making any commitments, investors should:

• Avoid investments promising low-risk/high-returns
  • In this case, inexperienced investors were lured by the day-trading firm offering high-leverage and low costs.
• Research the investment firm/broker for past deals
  • Two scammers operated a fraudulent firm, Nonko Trading, an unregistered brokerage firm. Investors can search the SEC’s database of registered broker-dealers and firms.
• Confirm Transactions and Investment Returns
  • These investors’ funds were never even routed to the market. Instead, they were sent directly to the scammers pockets. For investors who asked to close their accounts, scammers allegedly made “Ponzi-like” forms of repayment.
• Familiarize with Investment platforms and software
  • Nonko Trading perpetuated its scam through a false trading platform. Rather than using a live trading platform, the scammers used a training software that simulated securities trading.

Learning From Experience

The fact is, all investors are susceptible to risks. The lesson to be learned is that due-diligence and practical investing goes a long way in minimizing unnecessary investment risks, like fraud. While one must learn from personal experience, there is a network of resources out there to help inexperienced investors and empower them by learning through shared experience. Savage Villoch Law, PLLC has more than 20 years of experience defending investors and financial securities consumers. If you need help defending your financial security, contact us today.

Settling Customer Disputes

Usually, disputes over securities brokerage/trading are settled through arbitration as opposed to traditional litigation. Though arbitration is the primary form of dispute resolution, mediation may also be used as an alternative. In most contract agreements between securities consumers and broker-dealers, arbitrations are written out as the means of dispute resolution and are subject to the governing rules and regulations of the Financial Industry Regulatory Authority (FINRA).

Arbitration

This process differs from traditional litigation in several ways:

• A neutral arbiter oversees the resolution process instead of a judge or jury
• Arbitrations have a limited grounds for appeal
• Arbiters follow FINRA’s Code of Arbitration Procedure instead of legal precedent
• Documents submitted during arbitrations are not generally made publicly available
• Arbitration is usually more timely and cost-efficient than litigation

FINRA Arbitrations

Several different procedures for arbitrations are addressed by FINRA, based on nature of disputes and value of claims.

• Simplified Arbitration
  • Claims valued under $50,000
  • Least costly method
  • One arbiter assigned to dispute
  • In-person hearings not necessary
• Arbiter Selection
  • Claim value $50,000 or less – 1 arbiter
  • Values of $50,000-$100,000 – 1 or 3 arbiter panel
  • Claims over $100,000 – 3 arbiter panel
  • Read FINRA’s FAQ for arbiter selection process
• Securities Firms Using FINRA Process
  • Bats BZX Exchange, Inc., Bats BYZ Exchange, Inc., Bats EDGA Exchange, Inc. and Bats EDGX Exchange, Inc.
  • BOX Options Exchange, LLC
  • Chicago Board Options Exchange (CBOE) and C2
  • IEX Group
  • International Securities Exchange, LLC (ISE), Gemini and Mercury
  • MIAX Options Exchange (MIAX)
  • Municipal Securities Rulemaking Board (MSRB) (a self-regulatory organization for municipal securities)
  • NASDAQ
  • NASDAQ OMX
  • New York Stock Exchange (NYSE)
  • NYSE Amex
  • NYSE Arca
• Customer Dispute Fees
  • Filing fee assessed based on value of claim. Typically $225-$4,000
  • Hearing session fees based on dispute amount and number of arbiters
  • Arbitrations may be subject to other assorted fees (administrative, adjournment, etc.)
• Filing a Customer Dispute
  • Visit the FINRA Office of Dispute Resolution website to find resources and information on filing a claim
  • Customers usually have 6 years from date of occurrence to file a claim, but other statute of limitations may apply
• Finding a Lawyer
  • Though hiring an attorney is not necessary for an arbitration, customers may opt for legal counsel to navigate the process. This requires an attorney skilled in securities disputes. Savage Villoch Law, PLLC has been fighting for clients involved in securities disputes for over 20 years. Contact us today to find out your options in protecting your financial investments.

Last week, the Financial Industry Regulatory Authority (FINRA) handed out a $650,000 fine to a broker-dealer in the Lincoln Financial Network. The industry watchdog group found that the independent broker-dealer in Lincoln Financial’s network allowed thousands of customers’ data to be exposed to foreign hackers. Similarly FINRA also found that Lincoln Financial Securities Corp. failed to ensure the security of their customers’ consolidated reports. Consolidated reports store essential client account information and assets. FINRA’s charge states that sensitive customer information was left vulnerable to cyber threats from 2011-2015. The failure of Lincoln Financial to secure their customers’ data led to foreign hackers exposing more than 5,400 customers’ confidential information from one of the firm’s cloud servers. Lincoln Financial Securities has neither admitted or denied guilt to the allegations. The financial securities firm has reached a settlement with FINRA for $450,000.

Who’s to Blame?

What should be troubling for consumers is Lincoln Financial’s failure to accept ethical responsibility for their lack of action in properly securing vital customer information. They have reached a financial settlement, but refuse to acknowledge fault on behalf of the firm in either instance. The Lincoln Financial Network has nearly 9000 independent broker-dealer representatives. Apparently, oversight over these independent reps is severely lacking and, with this many, there could be a whole lot more customer account databases left vulnerable to security threats. National financial securities firms need to know that simply paying a fine is not sufficient. Thousands of customers’ financial security is left in the hands of these firms and they have a responsibility to protect their customers’ information. Bringing out the checkbook is not the same as waving a magic wand. A customer’s sense of security is violated when something like this happens. Large financial securities firms need to take measures to ensure their customers’ peace-of-mind about the continued protection and retention of personal information.