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Missouri Securities Arbitration Attorneys

The Securities Division under the Missouri Secretary of State is the state regulator responsible for protecting Missouri investors from financial fraud “with an emphasis on restitution for investors,” according to its website. Defrauded investors might like the sound of this, but they should know that relying solely on enforcement actions by a regulator is not typically guaranteed to result in full restitution or being financially made whole following a financial fraud. For this reason, investors who have been victimized should consider seeking counsel from experienced securities arbitration attorneys, such as the ones at the investment loss law firm of Malecki Law, to bring a parallel civil lawsuit alongside any regulatory or criminal action against the wrongdoer that may be in the works. 

Touting a recent enforcement action from last week, the Missouri Securities Division ordered David J. Spalding of Waterloo, Illinois, to repay $18,500 in lost principal to an elderly Missouri investor who Mr. Spalding solicited to invest in a Ponzi-like promissory note scam. Mr. Spalding apparently visited the home of the victim and solicited her to invest funds in Mr. Spalding’s own real estate company to complete some renovations. He also had her sign a promissory note that guaranteed a return of the principal through “prompt and punctual payment” to the investor. The Securities Division’s investigation revealed that Mr. Spalding misappropriated the funds, which is certainly “Ponzi-like.”

In a typical Ponzi scheme, which is often for a lot more money and involves many more investors, the fraudster will promise interest payments to new investors. The new investors would not receive actual interest because the investment product is not a real investment – it is fake. So no returns are generated, but they are instead “manufactured,” sometimes via fake monthly statements, and paid to the new investor from the original investment principal of an earlier investor. To keep a Ponzi scheme going, a fraudster needs to continually find new investors – i.e., new money – and hope that earlier investors don’t ask to make any substantial withdrawals that could upend the fraud. While many people believe Ponzi schemes to be rare and synonymous with Bernie Madoff, such schemes, in fact, continue to flourish, many times right within a legitimate financial institution that is failing to monitor its employees and accounts for warning signs as required by industry laws and rules.

The Securities and Exchange Commission (SEC), for example, is clear that customers of brokerage firms, especially large ones, should be able to expect their investments to be protected from fraud and that their accounts will be carefully supervised:

“Customers dealing with a securities firm expect, and are entitled to receive, proper treatment and to be protected against fraud and other misconduct, and may properly rely on the firm to provide this protection. Large securities firms generally have established fairly elaborate systems of supervision and internal control, in recognition of customer reliance on the existence of protective safeguards and of the fact that it is to be anticipated that in a large organization some employees may be tempted to engage in improper conduct.”

In the Matter of Reynolds & Col., SEC Broker-Dealer Proceedings, 39 S.E.C. 902, 916 (May 25, 1960).

The Financial Industry Regulatory Authority (FINRA) also has rules requiring supervision namely FINRA’s supervision rule, Rule 3110, stating:

“Each member shall establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules. Final responsibility for proper supervision shall rest with the member.”

FINRA Rule 3111 (a).

Thus, imperative for any investor seeking a recovery against large financial firms with this supervision obligation, it is not only important to hire a securities arbitration law firm that is fully familiar with supervision issues, the types of documents and exception reports that would evidence supervision (or lack thereof), but also securities arbitration lawyers who understand how fraudsters operate, particularly in Ponzi schemes.

The problem in recovering investment funds with most Ponzi schemes is that the money is usually gone by the time the scheme is uncovered. Money is either spent, hidden offshore, or placed in assets assigned to other people besides the fraudster (e.g., a family member or co-conspirator). While the Missouri investor in the earlier example was ordered to receive full restitution of her $18,500, one needs to consider that this is a small amount, relatively speaking, and that in much larger financial frauds the money is usually going to remain missing. This makes it all the more important to not rely on a regulator for restitution, but to also file a parallel civil lawsuit against liable financial institutions with deep pockets, assuming there are signs that the institution was not providing reasonable supervision, as is required.

The securities arbitration attorneys at Malecki Law have extensive experience bringing successful failure to supervise actions against financial firms, especially those with a track record for failing to exercise their supervisory obligations as evidenced by prior censures and fines, which are publicly accessible. Malecki Law has recovered tens of millions of dollars for Ponzi scheme victims, almost all from financial firms who had the aforementioned duty to supervise – i.e., all while not even bothering to sue the fraudster Ponzi schemer, who most likely does not have any money left to repay the victims anyway. If you are a Missouri investor or retiree and have suffered investment losses, or believe your account was not properly supervised, please schedule a free initial consultation with Malecki Law – call us directly (212) 943-1233, or email

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Testimonials From Former Clients
I highly recommend Jenice and her team at Malecki Law. I had a challenging, and lengthly case. Jenice was professional, very knowledgeable, and a pleasure to work with. She managed to make the process far less stressful during a very difficult time. They care about their clients, and it definitely shows. Mario
Jenice is truly a miracle worker and one of the top securities lawyers. She handled a very difficult case for us, displaying her legal knowledge, intelligence, and savviness throughout the process. I cannot recommend her enough. The quality of work from her team rivals that of corporate law firms. She was always available, extremely professional, and made sure to know all the details of the case. We were very fortunate to have been referred to Jenice and highly recommend her for any securities related legal issues. Nathan A.
An excellent professional who represented us in trial regarding a bank fraud, an unexpected and difficult time. A professional that worked hard, persevering and who stood toe to toe against firms that had a team of excellent lawyers backing them up. Her unflinching determination really stands out, it makes you feel you have someone who really cares about trying to recover what you lost from the people that wronged you. Salomon Levi
It is difficult to thank you in words when gratitude comes from the heart, so I will try to link feelings with writing. It is essential for us to mention your excellence as a professional, your aptitude on legal fields, and your unavoidable persistence. All of these virtues that elevate the profession you exercise in such an admirable way, go hand in hand with your sense of ethics, your human warmth and the transparency in your actions. To sum up, thank you for being a listening ear and for having the right word while transmitting information about the legal process. Having you as our representative during such an adverse situation was a privilege and enough reason for our eternal gratitude. Angeles Aparain
To say that my securities litigation was complex would be a severe understatement. With multiple parties involved and spanning many years, trying to understand the issues was daunting to say the least. Jenice and her team broke down the transactions by segment and by party uncovering every hidden expense. In the end, I was more than happy and could not thank Jenice and her team enough. I would not hesitate to recommend Jenice to anyone. She is highly professional, incredibly knowledgeable, well connected to industry experts, has a tireless work ethic and is so pleasant and easy to communicate with. Five stars for sure! Andrew Loughrane