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Trusting others to manage your investments is common amongst retirees, but it presents additional risks that the Pennsylvania Department of Banking and Securities acknowledges in its publication 10 Tips to Keep Track of Your Investments. Many of the tips are variations around the same theme, which is keeping thorough records of all documents between you and your financial advisor and firm. But for investors who are victims of Ponzi cases or outright theft from their accounts, this is unlikely to make a difference because it is too easy for a fraudster to create fake correspondence and monthly account statements; anyone with a laser printer and a PDF editor can do this very easily. Even opting for electronic delivery of statements, tip number 6, is not necessarily any safer than receiving paper monthly statements in hardcopy and can further create new risks for the investor.
For instance, many investment scams are initially facilitated by the fraudster managing to get you to opt out of receiving hardcopy statements by mail. In Regulatory Notice 12-05, the Financial Industry Regulatory Authority (FINRA) acknowledges that electronic delivery is not necessarily a safe haven given the “increasing number of reports of incidents” of both email accounts and brokerage accounts being compromised by third parties. Fraudsters with access to your account can easily stop or divert your paper statements to a different address, and then email you a fake version of the statement, which typically delays the discovery of the fraud by giving the perpetrator time to get away with the crime. Both the SEC and FINRA require financial firms to ensure that they have proper and reasonable supervisory systems in place to protect customers against financial frauds committed through electronic means. If you have suffered investment losses and believe it was due to your brokerage or email accounts being electronically compromised, it is important to hire a securities fraud attorney who specializes in securities disputes and is familiar with the industry’s rules around account supervision.
Malecki Law is a Manhattan-based law firm with national outreach that provides broad representation in securities matters. Whether you reside near Philadelphia, Harrisburg, or Pittsburgh, the securities lawyers at Malecki Law represents both investors and financial professionals against the world’s largest brokerage firms.
Areas we provide representation include:
- Recovery of stock market investment losses, including unsuitable investments, Ponzi schemes or other frauds, or other financial losses due to negligence or failed supervision by the firm;
- Employment disputes with brokerage firms or negotiating employment transitions to new firms;
- Expungements of Form U5 customer complaints or other defamatory remarks;
- Responding to FINRA 8210 requests or subpoenas received from the Securities and Exchange Commission (SEC), whether for insider trading or violations of other federal securities laws;
- Responding to state regulatory subpoenas for documents or testimony, such as from the Pennsylvania Department of Banking and Securities.
Common subpoena inquiries from the Pennsylvania Department of Banking and Securities include matters involving violations of the Pennsylvania Securities Act (e.g., breaches of contract and fiduciary duty, insider trading, etc.) or other state licensing violations, including matters initiated by the Pennsylvania Insurance Department. A continued regulatory focus, at both the national and state level, include subpoena inquiries related to the sale or offering of non-registered securities. While the Pennsylvania Department of Banking and Securities is vague on the details of those it fined for state regulatory violations, it is clear from surveying its 2020 Enforcement Orders that a large majority of the assessed penalties are for violations of the of the Pennsylvania Securities Act of 1972.
One example of increased scrutiny by securities regulators is their targeting of the sale and issuance of cryptocurrency coins and tokens. Individuals and businesses have found that they can easily create their own Ethereum-based crypto, unique to their business, but they must be especially careful in how these tokens are used and marketed to the general public. One should be especially careful in any communications or marketing material that describes these tokens as an investment that will appreciate.
If you have received a subpoena or inquiry from the SEC, FINRA, or the Pennsylvania Department of Banking and Securities, you should contact Malecki Law for a free consultation. If your local rules require an attorney who is licensed in Pennsylvania, Malecki Law follows all guidelines to ensure that you are properly represented. Our experienced attorneys can help you respond to regulator inquiries, including helping you manage and reduce your risk of monetary or other civil penalties that the regulator may be seeking.