Litigation

By: Daniel M. Hanifin

“Selling away” is when a broker leads an investor to investments that are not offered through their brokerage house. Investing in securities outside of your brokerage account can be extremely risky, because investors will miss important investor protections that flow from the broker’s and the firm’s regulatory obligations, including the firms supervision of the brokers activities.

These investments are often presented as “alternative investments” or “outside investments.” Investors are often lured to these investments by promises of high returns with low risk. Another common theme in these cases is a representation by the broker that he/she has personally invested in the investment. Outside investments can take many forms including unsecured notes, limited partnerships, and limited liability companies.

Many of these alternative investments are in reality Ponzi schemes. Ponzi schemes are fraudulent alternative investment schemes that typically attract investors with promises of high returns and the investment initially produces some nice returns. However, these returns are money of subsequent investors. Ponzi schemes continue to pay investors with money received from subsequent investors, but eventually collapse when the well of new investors runs dry.

FINRA, the Financial Industry Regulatory Authority, takes these types of claims seriously. In April 2010, an arbitration panel in Kansas, awarded an investor more than $500,000 in damages flowing from her investment in two outside companies that her broker recommended.

If you think you have been a victim of one of these fraudulent investment schemes please contact Daniel Hanifin at (610) 692-1371.

By: Stephen P. Lagoy

Investment losses? Here’s an article that explains how you may be able to use arbitration to recover.

http://www.usnews.com/money/blogs/Fund-Observer/2009/09/23/could-arbitration-help-you-recover-investment-losses.html

For more information on how arbitration, mediation and alternate dispute resolution can help you and your business, contact our office.

By: Daniel Hanifin

What does an arbitration clause mean to me?

Most, if not all, customer account forms used by brokerage houses contain arbitration clauses.   An arbitration clause is a commonly used clause in a contract that requires the parties to resolve their disputes through an arbitration process. Although such a clause may or may not specify that arbitration occur within a specific jurisdiction, it always binds the parties to a type of resolution outside of the courts, and is therefore considered a kind of forum selection clause.  The vast majority of the clauses state that arbitration must take place before either the New York Stock Exchange (NYSE) or the National Association of Securities Dealers (NASD).  However, in 2007, the NASD and the NYSE combined their dispute resolution divisions into one body, known as the Financial Industry Regulatory Authority (FINRA).   (www.finra.org)

Arbitration before a FINRA panel is similar to going to court, but it is usually faster, cheaper and less complex.  FINRA has established discovery procedures that assist in simplifying the process.  In arbitration, the parties present their dispute through witness testimony and documentary evidence much as they would in court.   However, rather than a judge presiding over the proceedings, a panel of three arbitrators, two public and one industry, preside over the hearing.  The arbitrators study the evidence and render a decision just like a judge.  These decisions are binding upon the parties except in very limited circumstances where a court may overturn the decision; however, a reversal of an arbitration decision is rare.

This is part of an ongoing series of postings related to claims related to your investment accounts.  For more information on securities arbitration and claims against your investment professionals please contact Daniel M. Hanifin.

BY: Daniel Hanifin

The fact that your investment has decreased in value or that you, like millions of others, have lost money does not automatically mean that your broker or brokerage firm has engaged in actionable misconduct. Almost all investments involve risk and there is no bailout when you lose money in risk appropriate investments. However, if your investments have decreased in value as a result of action or inaction by your broker, you may have a valid claim. Below are several common claims against investment professionals/brokerage houses:

1. Recommending unsuitable securities: Claims for suitability arise when an investor is advised to purchase or sell a security that is unsuitable given – an investor’s age, financial situation, investment objective and investment experience – the investor’s profile. Claims for suitability can be based upon a recommendation of a certain type of security, a certain class of securities, the amount of an investment or the frequency of transactions.

2. Misrepresentation/Omission: These claims arise when an investment professional misrepresents or fails to disclose material facts concerning an investment, including but not limited to, a failure to disclose: a) the risks associated with an investment; b) the fees associated with a particular investment; and c) company financials, such as bond ratings.

3. Churning: A claim for churning arises when an investment professional engages in excessive trading within an investor’s account in order to generate commissions.

4. Failure to Supervise: Brokerage houses have an affirmative duty to supervise the activities of their brokers and a failure to do so may be the basis of a claim.

This is the first in a series regarding investor rights and securities litigation. For more information on the legal rights and responsibilities related to your investment accounts, contact Daniel Hanifin.

Welcome to the Litigation Section’s blog. Our firm is located in West Chester, Chester County, Pennsylvania, and Phoenixville, Chester County, Pennsylvania. This blog is intended to provide a litigator’s perspective on a wide range of specific legal issues, along with commentary on emerging legal trends. The content is intended to be useful to individuals and small businesses wanting to learn more about exposure to liability, avoiding liability, the process of civil litigation, and alternative dispute resolution options.

Disputes arise in a variety of settings. Our team of litigators is experienced in contract and business disputes, employment, real estate, banking and creditor’s rights, construction, mortgage foreclosures, commercial leasing, and estate and orphan’s court matters.

We invite you to bookmark and visit this site regularly, or you may use the box on the right to subscribe and receive regular email updates as site content changes. You can choose to receive updates through RSS feed or regular email. Should you have a specific legal concern that you need legal assistance in resolving, you are encouraged to contact us for an appointment and consultation.

For more information on our practice, please click here.

Brian D. Boreman

James C. Dalton

Daniel P. Dwyer

Nancy J. Glidden

John K. Fiorillo

Daniel M. Hanifin

Stephen P. Lagoy

Shannon M. Reilly

Christopher L. Turner

Donald C. Turner