The Beck Law Firm, LLC Blog

Welcome to The Beck Law Firm Blog. Start Here First.

 

Hello.  I'm attorney Joel Beck.  I help stockbrokers and investment advisers protect their #1 investment.  What's that?  Good question.  It is their career, their reputation, their ability to work and earn a living.  I also do a few other things that you can learn about below.   Read below to learn more about how to find information on this blog, and how The Beck Law FIrm, LLC might be able to be of service to you.  Whether you are here in the metro Atlanta area, or elsewhere, call the firm today to schedule a chat with me to discuss your need.

Here on BDLawBlog.com you'll find information and commentary on the firm's practice areas: securities regulation and compliance and financial markets litigation, basic estate planning, business law, and government investigations and regulatory matters.  Use the categories to the right of the screen to find posts in specific topics, and use the search bar on the right to do a custom search of the blog.  Below, you'll find a starting point for an introductory post in each practice area.

Please understand that while we've designed this blog to be helpful and informative, the blog is not designed to provide you with legal advice, nor can it be a substitute for legal advice specific to your situation.  If you need legal advice, please consult a lawyer.  And, of course, if we can be of assistance to you, please call on him.  

Be sure to look around and enjoy the blog, and check back from time to time as new posts are added.

Suggested Starting Points:

For Securities Compliance and Regulatory Matters (including government investigations and prosecutions), we suggest you start here with this post.

For basic estate planning in Georgia, including wills, powers of attorney, and health care directives, we suggest you start here with this post.

For business law issues, including forming a corporation or LLC in Georgia, we suggest you start here.

Thanks again for visiting BDLawBlog.com.  To find out how The Beck Law Firm, LLC might be able to assist you, please contact us at (678) 344-5342 today.

Broker-Dealer Enforcement Roundup

FINRA has published the notice of disciplinary cases for April 2013 online.  A few cases I think are worthy of discussion.  

In one case, a firm agreed to settle an action through an AWC and was censured and fined $150,000.  The findings included that the firm failed to establish and maintain an adequate supervisory system for supervising a representative's written communications in a foreign language when none of the firm's supervisory folks were fluent in that foreign language.  FINRA also found that the firm failed to supervise employee trading at other firms, and failed to have an adequate information barrier program in place, among other things.  Case No. 2011025644101.

In another case, FINRA made findings that a firm offered private placement, allegedly exempt from registration under Regulation D, to individuals just a few days after an initial phone call with the offeree. Such contact was deemed to be general solicitation and the firm properly failed to supervise the sale of the offering, among other things.  The firm was censured and fined $25,000.  Case No. 2011025614701.

Of course there were also the typical cases we come to expect each month including improper use of discretion, forgery, selling away, undisclosed outside business activities, trade reporting, etc.

Further, FINRA issued a separate press release earlier this month on some AML cases.  By now, firms should understand that AML compliance continues to be an area of focus for regulators.  Forewarned is forearmed.

Finally, the SEC recently issued an opinion in an appeal to the SEC for review of a FINRA enforcement action.  The Commission affirmed FINRA's findings of violation and sanctions.  In this case, FINRA barred a broker based on findings that he willfully failed to disclose an injunction entered against him, as well as the revocation of his CPA license, on about 36 Forms U4 filed with about 34 different employing firms over a 6+ year period.  The SEC here again discussed the willfulness concept under the securities laws, and the resulting statutory disqualification that flows from such a finding of willfulness (for more on the wilfullness concept, see the posts under the category of Form U4 issues - you'll find a topical index on the right-hand side of the blog).

 

Living Trusts: Do You Need One? Perhaps Not.

Whenever I work with a client on estate planning issues, my tendency is to keep things as simple as possible.  If the client doesn't need any complex planning, then we don't do it.  And, in my practice, rarely does a client actually have such a need. The result is a more streamlined planning process that is easier on the client, and the client's wallet.

It seems that Sandra Block from Kiplinger's magazine (June 2013) just might agree with me.  In her article, Why You Don't Need a Living Trust, Block points out several reasons that living trusts might not be what someone needs, and that there might be lower-cost alternatives that will achieve the same objective. Among the points she notes are that not all assets go through probate and probate doesn't have to be complicated, you have to move assets into the trust for the trust to be effective, and there can be some unforeseen consequences if it is not done correctly.  

There may be some valid reasons for utilizing more advanced planning tools like living trusts and other documents, but you should certainly consult with a lawyer about your needs and concerns to help determine what is actually needed, and what the benefits, and drawbacks, of different planning tools would be in your situation. 

I wish I would have..... Stockbroker Transitions and Firm Changes, Part V

Continuing on in this series relating to stockbrokers changing firms and transitioning their practice from one firm to another, for this post I asked some of my friends and clients a simple question: If you got to do-over your recent firm change, what would you do differently?  Here's some of the responses I received.

1.  I would have been more organized to make the move easier.  I found that no detail was too small.  I focused on only the information I was allowed to take with me under the rules and the protocol, but I would have better organized info. and thought through the process more.

2.  I wish I had interviewed a few more folks who had made the move in depth when I took the leap to move to an independent broker-dealer.  I should have taken more guys to lunch and talked to them more about their experience, how they moved their book over, and how to deal with difficulties early on.  This broker told me that he talked to about 3 other brokers, but wished he would have spoken to about 5 to 7.

3.  I wish I would have run a sample of all the paperwork necessary to allow clients to move accounts over, to get a better understanding of what's needed at the new firm to open and ACAT accounts, and so that I would understand the difference in the account opening process at the new firm vs. my old firm. 

Each of these are valid points to consider.  Moving firms and trying to move your business from one firm to another, whether you are going independent or not, can be a difficult process.  Done right, it can be a rewarding experience as well.

 

Joel Beck, a securities lawyer in metro Atlanta, Georgia, helps stockbrokers make career transitions, deal with regulatory investigations and actions, and provides general legal advice relating to the broker-dealer industry, including compliance and disclosure issues.  He represents stockbrokers across the country, where allowed, from his Georgia office.  

Some Other Important Considerations, Stockbroker Transitions and Firm Changes, Part IV

We’ve briefly discussed the major financial considerations in evaluating changing a broker-dealer.  But, what else should wise advisors and stockbrokers consider when trying to determine if the grass is really greener on the other side of the street?  Here’s a few: 

• Know the product mix.  What products will be available to you at the new firm, and more importantly, what products do you like now that won’t be available?
• What type of transition assistance will you receive in the form of help with contacting your client book, getting your ACAT forms, getting those items processed, etc.  How long will you be able to use any extra staff for such work?
• Understand and consider the reputation of the firm you are considering joining.  How is their name viewed in the public?  How will your clients view the company?  What steps, if any, do you need to take to be able to address any negative views you might encounter?
• Are you going to be charged – or will the clients be charged – any ACAT or processing fees to move their accounts, either at the old firm or the new firm?  How might that affect your business?  What is your plan for dealing with these charges?
• What does your current registered rep. agreement limit or prevent you from doing?  Are you subject to any covenants not to compete, or not to solicit clients? Regardless of whether you are in a protocol for broker recruiting situation, you need to understand your contractual obligations, and then understand whether those requirements are changed based on the protocol, if it applies.
• If your business arrangements are changing, do those trigger any new disclosure obligations for your Form U4?
• How will you be supervised, and by whom? Will it be a good fit for you and for your business, and will you receive the appropiate supervision and compliance support you need, especially during the initial transition period?

This isn’t an exhaustive list, but a good start of other things to consider when looking at making a change.  Keep reading the blog for additional posts in this series. 

Joel Beck, a securities lawyer in metro Atlanta, Georgia, helps stockbrokers make career transitions, deal with regulatory investigations and actions, and provides general legal advice relating to the broker-dealer industry, including compliance and disclosure issues.  He represents stockbrokers across the country, where allowed, from his Georgia office.  

FINRA Issues Regulatory Notice on Communications Regarding Real Estate Investments

May 2013 - FINRA issued Regulatory Notice 13-18 concerning compliance with the communications with the public rule (FINRA Rule 2210) concerning broker-dealer communications about unlisted REITS and other investments suh as DPPs.  Among other things, FINRA is concerned about disclosures and discussion of distributions, stability, redemption and liquidity issues, performance, and comparisons to other products. FINRA is also concerned about use of pictures of real property and ensuring that sufficient disclosures are made in regards to the property being depicted.  The full notice can be found here.

The issuance of this notice demonstrates, in my view, that FINRA continues to have concerns about sales practices and disclosures in this area.  The 2013 examination priorities letter detailed concerns about many product types, included non-traded REITS.  We can expect that FINRA will continue to be focused on problems/concerns in this area, and that routine and special examinations will target compliance with sales practice rules - and the communications standards - when dealing with these products.  Firms and brokers should be aware of FINRA's concerns especially if they are engaging in sales of these products.  

I Really Have to Repay That? Stockbroker Transitions and Firm Changes, Part III

You recently left your broker-dealer to go elsewhere and got a demand letter in the mail for repayment of the unpaid balance owed to the broker-dealer in connection with your retention bonus or forgivable loan or other promissory note arrangement.   “Do I have to repay them?” is a question I hear quite often. 

I can’t talk about your specific situation without reviewing the documents and talking to you in more detail, but the general answer is that yes, forgivable loans and promissory notes signed by a broker can often be enforced against the broker, and you should expect your firm to fight for the money they believe you owe them. 

The questions that often arise in these situations are:

* What do you owe the firm?  You need to understand how the forgivable amounts are determined, and when such forgivable amount is credited to your promissory note.  You also need to understand when the note becomes due and payable and how interest is computed.

* What claims, if any, do you have that might work to offset any amounts I owe the firm?  Was there anything improper in connection with your departure from the firm or during your time there? 

* What do you do – or not do – to resolve the issues?  Does an attorney help or hinder the process?  Can a more favorable resolution be negotiated?  Will the firm consider a payment plan?  How does arbitration work if I don’t pay?

My best advice is to consult with experienced counsel about these issues before you make the move.  If you didn’t, then get someone on board to help you resolve your financial obligations with your former firm and get things worked out, so you can focus on completing your transition and growing your business and servicing your clients. 

Joel Beck, a securities lawyer in metro Atlanta, Georgia, helps stockbrokers make career transitions, deal with regulatory investigations and actions, and provides general legal advice relating to the broker-dealer industry, including compliance and disclosure issues.  He represents stockbrokers across the country, where allowed, from his Georgia office.  

More Big Brother? FINRA seeking privacy ban exceptions to laws to monitor social media.

Wow.  Sometimes I think that broker-dealer regulation can't really get any more oppressive.  But when I think that, I'm usually soon proved wrong.  Case in point, an article from yesterday over at CNNMoney informing us that FINRA apparently wants more access to the social media use of a registered rep., including their facebook account.  Under the guise of "investor protection" FINRA is apparently seeking to exclude broker-dealers from privacy bans to protect employees from employers. Granted, when a broker is using social media for business purposes, then the rules often apply and information must most likely comply with communications with the public standards.  But in my view, non-business related social media use should not be subject to the oversight of an overzealous regulator regardless of the industry.  

 

Show Me The Money. Stockbroker Transitions & Firm Changes, Part II

Show me the money.  If you’re making a move to another firm, certainly this is a topic to be considered. Most of us work as a way to earn a living.  Stockbrokers must naturally consider the compensation system at other firms that they are considering joining, including the availability of any upfront money in the form of a transition bonus, a forgivable loan, or whatever, as well as the compensation scheme once they switch firms.

When considering a switch, compare apples to apples.  Look at your current payout or grid system at your existing firm, and the new one.  Understand the different elements of the grid and how, and when, commissions are paid and calculated.  Also look at what expenses might be charged to you that offset your earned commissions.  Also, look at the specific terms of any bonus or forgivable loan programs.  Read through the documents and have your lawyer review them as well.  You need to understand how much is on the table, how bonuses are paid or how a portion of the loan is forgiven if applicable, the interest rate, when repayment is due, and, of course, the length of time the bonus/forgivable loan period exists. 

These days, I typically see bonus/loan agreements that last for seven to nine years, and the bonus programs frequently come with minimum production requirements as well.  If you fail to meet the production requirements, there is no bonus to offset the loan repayment due, and that comes out of your compensation or your wallet.  Before signing on the line, you need to clearly understand the terms of any agreement presented by the new firm.

Importantly, understand that almost all of the transition deals that a firm will enter into are for “at will” employees, and your employment and registration with the firm can be terminated at any time, for any reason or no reason at all.  Understand what your repayment obligations are in the event that you leave the firm either by your choice or the choice of the firm.

Finally, when looking at signing on to the new firm, try to get promises from the firm in writing with your employment offer and loan agreement.  If the firm is going to provide you with a certain amount per year for marketing, write it down.  If they are going to provide you with certain staffing or assistants, put it in writing.

In future posts in this series, I’ll talk about issues relating to leaving the old firm, your financial obligations to them, and some other issues to consider when looking for the greener grass of another firm.

Joel Beck, a securities lawyer in metro Atlanta, Georgia, helps stockbrokers make career transitions, deal with regulatory investigations and actions, and provides general legal advice relating to the broker-dealer industry, including compliance and disclosure issues.  He represents stockbrokers across the country, where allowed, from his Georgia office. 

 

Stockbroker Transitions & Firm Changes - Part I

So you’re thinking of making a move to another firm?  Lots of folks do for lots of different reasons.  Regardless of your reason or rationale at this point, there are several issues for you to consider and address before you sign with the new firm.  You need to consider your true motivation for moving, the financial aspects of the deal, and any financial considerations associated with leaving where you are now.  Also, you have to consider the likelihood of client retention, the working environment at the new firm including your being supervised, the stature and name recognition of the new firm, including its disciplinary history, as well as your own disciplinary or other disclosures.  Over the next few weeks or so, I’ll address several of these concerns in this blog series on broker transitions.

The first main issue to address is simple, or so it seems.  But don’t let that simplicity fool you.  Ask yourself:  Why make a move at all?   If there is not sufficient justification, then making a move might not be right for you.

A broker takes on a lot of risk in trying to move his or her business from one firm to another one. One risk is that not all of the clients will be retained.  For example, some don’t want to move to the “new” firm for whatever reason, some decide they weren’t really happy with the broker in the first place and use this as a reason to end the relationship, or maybe some opt to stay on with the nice young man or woman who called them from the “old” firm and promised better and more responsive service and attention than you gave them when you were there.  There are also other risks that we’ll discuss in more detail later in this series.

In my experience, most experienced brokers move for one main reason: client service.  They believe that the new firm will enable them to better serve and support their clients.  Sometimes this is because of a wider range of products and services that are offered, or perhaps it is due to proprietary features and benefits that can be offered to the client.  Sometimes, it’s because the broker perceives the other firm as more navigable or user-friendly and think that they will actually be able to focus on servicing their clients and growing their business rather than dealing with red tape or internal bureaucracy.

Of course, sometimes it’s because of money in the form of a higher payout or better grid or a nice forgivable loan or upfront bonus or transition money.  There’s nothing wrong with the money side of the equation, and that’s certainly a part of the industry.  But take caution if that’s your only motivation. Understand that you’ve got a problem if you make the move and then start making calls to your clients inviting them to move with you and you don’t have anything more to them other than “follow me to XYZ Securities, because they pay me more here.”   My point is this: there’s more to your business than the money.  Be sure to focus on the overall situation to determine if a transition is right for you – and will help you in serving your clients.

Stay tuned for more posts in this series.

Joel Beck, a securities lawyer in metro Atlanta, Georgia, helps stockbrokers make career transitions, deal with regulatory investigations and actions, and provides general legal advice relating to the broker-dealer industry, including compliance and disclosure issues.  He represents stockbrokers across the country, where allowed, from his Georgia office.  

RIAs: Are these really the top worries?

I took a few minutes this afternoon to catch up on some newsletter reading and found a link to an article over at financial-planning.com by Bob Veres on the top 10 worries of advisors.  The set-up to the article is simple: he asked readers to respond to him with their top professional fears and he wrote about the main themes he heard in the responses he received.

What strikes me most about the results is that the vast majority of the worries or fears that advisors articulated are things over which they have no control.  For example, eroding confidence in the investment system, fear of another economic meltdown, political irresponsibility, geopolitical issues, and constant tax changes are by and large, in my view, issues out of the control of the typical advisor.  Other than lobbying for political changes, Joe and Jane Advisor won't lilely have any meaningful impact on any of these issues. While planning for possible events might be wise, the advisor actually worrying about these issues won't produce any meaningful result and won't add to the quality of the advisor's life - or the client's.  So my question is simple: Why worry about these things?

It seems to me that an advisor's efforts - and worries - ought to be more focused and targeted on things for which the advisor has some level of control.  Worry - and act on -  your career, your compliance record, your ability to relate and connect to prospective clients, communication skills with PCs and clients, marketing plans, risk management issues, productivity and technology skills and use, developing and maintaining referral sources etc.  When "worrying" over these items, you can identify specific, actionable steps to address the worries by working on your business instead of in it, and then will likely see positive returns in your satisfaction with your business.