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Archive for October, 2013


FINRA publishes additional guidance on expungement

On Tuesday, October 15, 2013, FINRA Dispute Resolution published the following guidance and reminder for arbitrators when considering expungement requests.

Extraordinary Nature of Expungement Relief — Expungement is an extraordinary remedy that should be granted only under appropriate circumstances. Information should be expunged only when it has no meaningful investor protection or regulatory value. Once information is expunged from the CRD system, it is permanently deleted and thus no longer available to the investing public, regulators or prospective broker-dealer employers.

Role of Arbitrators in Expungement Cases — Arbitrators have a unique, distinct role when deciding whether to grant a request to expunge information from a broker’s CRD record. In making these determinations, arbitrators should consider the importance of maintaining the integrity of the information in the CRD system. Ensuring that CRD information is accurate and meaningful is essential to investors, who may rely on the information when making decisions about brokers with whom they may conduct business; to regulators, who rely on the information to fulfill their regulatory responsibilities; and to prospective broker-dealer employers, who rely on the information when making hiring decisions.

Given this significant role, arbitrators should ensure that they have all of the information necessary to make an informed and appropriate recommendation on expungement. Thus, arbitrators should request any documentary or other evidence they believe is relevant to the expungement request, particularly in cases that settle before an evidentiary hearing or in cases where only the requesting party participates in the expungement hearing.

BrokerCheck Report Review — Arbitrators should ask the broker seeking expungement (or the party seeking expungement on a broker’s behalf) to provide a current copy of the BrokerCheck® report. Arbitrators should carefully review the report when considering whether expungement is appropriate. Arbitrators should pay particular attention to the “Disclosure Events” section of the report.

Importance of Providing an Explanation for Granting Expungement  — Rules 12805 and 13805 require arbitrators to provide a written explanation of the reasons for finding that one or more of the Rule 2080 grounds for expungement apply to the facts of the case before them. Arbitrators recommending expungement should ensure that the explanation is complete and is not solely a recitation of one of the Rule 2080 grounds or language provided in the expungement request. Specifically, arbitrators should identify in the award the reason(s) for granting the request and any specific documentary or other evidence that they relied upon in granting expungement.

Asking Whether Settlements Are Conditioned on Agreements Not to Oppose Expungement — Arbitrators should inquire and fully consider whether a party conditioned a settlement of the arbitration upon agreement not to oppose the request for expungement in cases in which the investor does not participate in the expungement hearing or the requesting party states that an investor has indicated that he or she will not oppose the expungement request.

For additional information: http://www.finra.org/ArbitrationAndMediation/Arbitration/SpecialProcedures/Expungement/

Crowdfunding is almost here…

Businesses and start ups are on their way to selling ownership stakes in their companies by soliciting investors over the Internet under a proposal advanced by the Securities and Exchange Commission.

The plan would set rules for equity crowdfunding, which lawmakers said would spur growth by easing financing when they mandated it in the 2012 Jumpstart Our Business Startups Act. The rules, which the SEC voted 5-0 to release for public comment on Tuesday, may boost the crowdfunding movement and help the agency through its backlog of regulations required by the JOBS Act and Dodd-Frank.

Businesses and startups too small or risky to attract funding from banks or venture capitalists are expected to use equity crowdfunding. Regulators say they tried to address concerns that such fundraising will create a channel for fraud by allowing upstart companies to issue illiquid shares to retail investors.

A company using equity crowdfunding is limited to raising a maximum of $1 million per year. While companies raising smaller amounts would have to share financial statements and income-tax returns with investors, a business looking to raise more than $500,000 would have to provide audited financial statements.

AUB investigates UBS Puerto Rico for losses in bond funds

Aidikoff, Uhl & Bakhtiari continues to investigate the sales practices of Wall Street firms in recommending bond funds to it’s clients.

In May 2012 the SEC issued a Cease-and-Desist Order against UBS Puerto Rico. Pursuant to the order, UBS Puerto Rico agreed to pay $26 million in disgorgement and settle charges that it sold allegedly mispriced closed end funds to investors. The alleged mispricing related to proprietary funds of UBS Puerto Rico which invested in Puerto Rican municipal bonds.

On October 2, 2013 the New York Times reported that UBS has undertaken an investigation over the sales of leveraged bond funds to its clients.   Some of the bond funds at issue may be:

 Tax-Free Puerto Rico Fund

Tax-Free Puerto Rico Fund II

Tax-Free Puerto Rico Target Maturity Fund

Puerto Rico AAA Portfolio Target Maturity Fund, Inc.

Puerto Rico AAA Portfolio Bond Fund

Puerto Rico AAA Portfolio Bond Fund II

Puerto Rico GNMA & U.S. Government Target Maturity Fund

Puerto Rico Mortgage-Backed & U.S. Government Securities Fund

Puerto Rico Fixed Income Fund

Puerto Rico Fixed Income Fund II

Puerto Rico Fixed Income Fund III

Puerto Rico Fixed Income Fund IV

Puerto Rico Fixed Income Fund V

Puerto Rico Fixed Income Fund VI

Puerto Rico Short Term Investment Fund

Multi-Select Securities Puerto Rico Fund

Puerto Rico Investors Tax-Free Fund

Puerto Rico Investors Tax-Free Fund II

Puerto Rico Investors Tax-Free Fund III

Puerto Rico Investors Tax-Free Fund IV

Puerto Rico Investors Tax-Free Fund V

Puerto Rico Investors Tax-Free Fund VI

Aidikoff, Uhl & Bakhtiari represents retail and institutional investors around the world in securities arbitration and litigation matters.  Attorneys for the firm have appeared before the Financial Industry Regulatory Authority (FINRA) and in numerous state and federal courts to resolve financial disputes between customers, banks, brokerage firms and other financial institutions.

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