The SEC Cracks Down on Illegal Activity: Protecting Investors and Ensuring Fair and Reliable Markets for All

By Majda Muhic, Fall 2016 Student Intern

 In fiscal year 2016, which ended September 30, the Securities and Exchange Commission reached record highs in its enforcement activities as it successfully held individual executives, companies and, market participants, including a municipality, accountable for a range of illegal conduct. The agency’s enforcement goals are wide-reaching and clear: protecting investors and ensuring fair and reliable markets for all.

The numbers of filed actions speak for themselves: in just one year, the SEC filed a record high of 868 actions exposing financial reporting-related misconduct and misconduct by registrants and gatekeepers; 160 of these involved investment advisers and investment companies – another record to date.  The financial results of the agency’s enforcement activities also speak for themselves: the agency recovered $4 billion in disgorgement and penalties, intended not only to penalize wrongdoers for their past wrongful conduct but to deter similar misconduct in the future. The agency further rewarded whistleblowers a total of $57 million in a single year – again, SEC’s highest to date.

This fiscal year further saw a range of first-of-their kind actions, including an action against a private equity adviser for acting as an unregistered broker, and a first-of-its-kind successful ligation: the SEC won its first federal jury trial against a municipality, the city of Miami, and its former Budget Director for multiple antifraud violations of the federal securities laws for failing to disclose the city’s deteriorating financial condition during 2007 and 2008. Financial fraud and the often accompanying failure to disclose form a central concern of the SEC this year.

According to SEC Chair Mary Jo White, the agency’s enforcement success is in part due to the changes in approach of its enforcement program, including the use of new data analytics to both detect illegal activity and speed up investigations. The message is clear: the SEC is committed to protecting investors and ensuring a fair and reliable marketplace for all.

This week’s series focuses on the SEC’s 2016 enforcement efforts. For a full review of its 2016 enforcement activities and results, read more here.

You’ve Filed a Claim – What’s Next? The Award

By Mary Ann Hanke, Fall 2016 Student Intern

After the arbitration hearing, you have done all that you can do to argue your side of the case. The arbitrator has heard all the evidence, read the pleadings and exhibits, and now has thirty days to make a final ruling.

The information that is required to be in an award includes the following:

  • An acknowledgement by the arbitrators that they read the materials and pleadings filed
  • Damages and other relief requested and awarded
  • Resolution of the issues
  • Date of the hearing and award

Unlike judges, arbitrators are not required to provide reasons for why they ruled the way they did, and the orders are not subject to review or appeal. On one hand, this provides more finality and a quicker resolution. On the other, if the arbitrator did not rule in your favor, you have no other recourse. The only way to challenge an arbitrator’s award is under state and federal laws for the following reasons:

  • The award given was based on fraud, corruption, or undue means
  • Arbitrators were guilty of misconduct or exceeding their powers, or disregarding a clearly defined law or legal principle
  • There is no factual or reasonable basis for the award

If the arbitrator does award you damages, the Respondents have thirty days to pay. If they don’t, however, then you should contact FINRA. FINRA may suspend or revoke the registration for a member firm or associated person for failing to pay such fees.

After you have received your arbitration award, you are finally done with the arbitration process. You have gone from filing a statement of claim to initiate the proceedings, through arbitration selection, discovery, the hearing, to a final resolution. Contact FINRA if you have questions about the Rules of Conduct governing each step of the process.

You’ve Filed a Claim – What’s Next? The Arbitration Hearing

By Mary Ann Hanke, Fall 2016 Student Intern

The arbitration hearing is the pinnacle step in this process. After a filing a statement of claim, everything you have done has been in preparation of this hearing. You have your arbitrator, you have gone through discovery, and your case is ready. Continue reading

You’ve Filed a Claim – What’s Next? Discovery

By Mary Ann Hanke, Fall 2016 Student Intern

Now that you have filed a claim, gotten an answer, and chosen your arbitrator, it is time to start building your case in preparation for the arbitration hearing.

For your statement of claim, you probably had to do some research and document review of your past account statements, but now you will have the opportunity to obtain more facts and information from the Respondents. In all cases where a hearing is requested, there are presumptively discoverable information that all parties must provide to the other parties.  If that presumptively discoverable information does not fill in any remaining holes, you can also send the other side a Discovery Request. Once you send this to the Respondents, they have the obligation to provide and send the materials in response to such requests or object in limited circumstances. Continue reading

You’ve Filed a Claim – Now What? Arbitrator Selection and Prehearing Conferences

By Mary Ann Hanke, Fall 2016 Student Intern

You have filed a statement of claim, and forty-five days have passed and the answer is officially due. Regardless of whether the Respondents in your claim have actually answered, FINRA will begin the next step in the process, which is arbitrator selection. Continue reading

You’ve Filed a Claim – What’s Next? The Answer

By Mary Ann Hanke, Fall 2016 Student Intern

 It’s election year, so bear with me: Filing a statement of claim against your broker or brokerage firm is a lot like a presidential campaign. How?

Just like you would if you were on a campaign trail, you’ve likely done a lot of preparation leading up to the filing. You (or your attorney) have examined your brokerage statements, determined the amount of money you lost, and written a persuasive statement of claim. And you’ve just filed it with FINRA. Done, right? Continue reading

Support the IAC in the Associates’ Campaign for Legal Services

The Atlanta Bar Association’s Atlanta Council of Younger Lawyers Section is continuing its long running Associates’ Campaign for Legal Services to support legal services and raise awareness of pro bono legal services.  Since 2000, the Campaign has raised over $500,000 for legal services organizations in Atlanta.

The Investor Advocacy Clinic is one of several beneficiary organizations participating in the Campaign this year. We hope you will consider supporting us.  Learn more about the Campaign here.  If you are interested in supporting the Investor Advocacy Clinic through the Campaign, you may do so here.  The Campaign runs through October 31, 2016.