If you are accused of a crime, contacted by law enforcement or some other investigatory agency, or believe you may have committed a crime you should contact a criminal defense attorney. A lawyer can intervene with the police and either prevent an arrest or, if you are going to be arrested, arrange for your surrender at a time and in a manner that minimizes embarrassment to you or your family. Hiring a lawyer may also protect you from being questioned by the police.
If you are arrested the first thing you should do is inform the arresting officer(s) that you choose to invoke your right to remain silent and refuse to answer any questions. You should at that point tell the officer(s) that you wish to contact an attorney.
That old saying – “anything you say can be used against you” – is true. Quite often people think that they can give law enforcement a reasonable explanation to prevent being arrested. That typically does not work. More often than not that will get you deeper into trouble. Quite often the person being arrested doesn’t know what information law enforcement is looking to obtain from them and more importantly, what information they already have. Thus, a seemingly reasonable explanation of innocence quite often helps law enforcement build a stronger case against them.
The only way to ensure that you do not fall into that pitfall is to invoke your right to remain silent. After all, it is your right.
Every accused person has a constitutional right to competent legal counsel in a criminal proceeding. However, not everyone has the financial ability to hire an attorney. As a result, free legal representation is provided by either the state or the federal government (depending on the forum) to those individuals who are considered indigent (i.e. poor/needy). However, if it is determined that you are not indigent, you will not qualify for legal aid.
Additionally, more often than not you are better off hiring an attorney of your own choosing as opposed to accepting an attorney that was assigned to you. This way you can determine if that attorney is appropriate for you and determine if that attorney is going to be able to give your case the attention that is needed. After all, it is your life and future that you are entrusting your legal representative with.
An arraignment is your initial appearance in court in which you, as the defendant are formally informed of the criminal charges against you. At the arraignment, your attorney will receive the complaint stating the charges that have been filed against you. If you’re in custody, your attorney will have the opportunity to argue the terms of your release (i.e. bail or your own recognizance).
Bail is money or other property that is deposited with the court to ensure that the person accused will return to court when he or she is required to do so. After the defendant has returned to court as required, the bail will be returned at the end of the case. The bail is returned even if the defendant is ultimately convicted. However, if the defendant does not return to court when required or violates their bail conditions, the bail will be forfeited to the court and will not be returned.
Crimes are generally divided into two categories depending on their level of seriousness – felonies and misdemeanors. Although, both are crimes and have very serious consequences for the accused, generally speaking, felonies are more serious than misdemeanors and carry much greater consequences in terms of incarceration and fines.
Under New York penal law, misdemeanors are divided into two categories – “A” misdemeanors (a maximum of one year of incarceration) and “B” misdemeanors (a maximum of six months of incarceration).
Felonies under New York penal law range from “A” felonies (the most serious) all the way down to “E” felonies (the least serious). The most serious of felonies (“A’) carry a maximum sentence of life imprisonment, while the least serious of felonies (“E”) carry a maximum sentence of four years incarceration.
Under federal criminal law, crimes are generally divided into two classes, felonies and misdemeanors. These are further subdivided into subcategories with differing periods of incarceration. Felonies range from “A” (the most serious with a maximum penalty of death and a maximum period of incarceration of life) to “E” (the least serious with a maximum incarceration period of one year).
Misdemeanors range from “A” (the most serious with a maximum incarceration period of one year) to “C” (the least serious with a maximum incarceration period of 30 days).
Securities fraud comes in many forms. If you are an investor, you should review the documents you receive from your brokerage firm and broker. These documents include the new account documents that were completed by either you or your broker. The new account documents are supposed to accurately reflect your investment objectives, risk tolerance, net-worth and income. This information serves as the basis for every recommendation the broker makes to you.
Additionally, you as an investor should review your trade confirmations and account statements. These documents should reflect the transactions that were authorized by you as the investor. Moreover, these documents reflect the amount of activity versus commission earned by the broker. The activity should make economic sense to you as the investor. For example, numerous opening and closing transactions initiated by the broker or brokerage firm in which the commissions generated are consistently greater than the profit to you as the investor does not make good economic sense to the investor.
Any departure from what the client actually provided to the broker and/or brokerage firm could be a basis for securities fraud. Indeed, a comparison of the activity in the account to information on the new account form can reveal such broker wrongdoing as:
- Unsuitable securities recommendations
- Unsuitable recommendation of the use of margin
- Churning
- Unauthorized trading
FINRA is the Financial Industry Regulatory Authority, Inc. It is a private company that acts as a self-regulatory organization. FINRA is the successor to the National Association of Securities Dealers, Inc. and the member regulation, enforcement, and arbitration operations of the New York Stock Exchange. It is a non-governmental organization that regulates member brokerage firms and exchange markets.
FINRA operates the largest securities dispute resolution forum in the United States, and has extensive experience in providing a fair, efficient and effective venue to handle a securities-related dispute. The resolution of problems and disputes is accomplished through two non-judicial proceedings: arbitration and mediation.
FINRA provides a forum for the resolution of disputes that arise in the securities industry. The vast majority of brokerage firms require clients to agree to arbitrate any disputes they may have with their broker and brokerage firm regarding their account through FINRA’s arbitration process, FINRA Dispute Resolution.
Arbitration is similar to going to court, but is usually faster, cheaper and less complex than litigation. It is a formal alternative to litigation in which two or more parties select a neutral third party, called an arbitrator, to resolve a dispute. The arbitrator’s decision, called an award, is final and binding. By arbitrating a claim you cannot have the same matter decided by a court of law. In resolving disputes through arbitration, a FINRA arbitrator or panel (consisting of three arbitrators) will listen to the arguments set forth by the parties, study the testimonial and/or documentary evidence, and then render a decision. When an arbitration case goes to a hearing, it can take up to 16 months for an award to be determined.
The arbitration hearing is similar to that of a trial. The Parties have opening statements, present and cross exam witnesses, introduce documents into evidence and have closing arguments. The arbitration panel renders an award after deliberations.
Mediation offers a flexible alternative to arbitration. It is an informal process in which a trained, impartial mediator facilitates negotiations between disputing parties, helping them find a mutually acceptable solution. Both parties in a dispute must agree to mediation. However, FINRA does not require parties to mediate.
Mediation can be initiated at any time before arbitration commences and even during an arbitration case before it concludes.
It is illegal for a broker-dealer or registered individual to use any measure to defraud, make false statements, omit relevant information that would deceive another person in relation to conducting transactions involving stock and other securities.
Securities fraud encompasses a wide spectrum of activity. Generally, it is any deceptive practice for the purpose of inducing an investor to act or refrain from acting with regard to a security or investment. Additionally, it also includes actions such as embezzlement, Ponzi schemes and insider trading just to name a few.
Registered securities professionals and broker-dealers have an obligation to only recommend securities to an investor that are appropriate and in line with that specific investor’s financial profile. Specifically, FINRA Rule 2111 requires that a firm or associated person have a reasonable basis to believe a recommended transaction or investment strategy involving a security or securities is suitable for the customer.
The determination of what is suitable for a specific investor is based on the information the registered individual and/or broker-dealer obtained from the investor through reasonable diligence. Broker-dealers are obligated to make a reasonable inquiry to determine the investor’s: age, income, net-worth, investment objectives and risk tolerance.
Churning is a term applied to the practice of a broker conducting excessive trading in a client’s account mainly to generate commissions. Churning is an unethical and illegal practice that violates SEC rules (15c1-7) and securities laws. While there is no quantitative measure for churning, frequent buying and selling of securities that does little to meet the client’s investment objectives may be evidence of churning.
Conflicts of interests tend to be created in the investor/broker-dealer relationship at the retail level when a registered representative and/or broker-dealer receives a specific benefit for recommending particular securities. Such benefit can include proprietary products, payments from third parties and compensation arrangements.
Broker-dealers are obligated to disclose all material facts relating to such conflicts of interest associated with the recommendation.
Improper mutual fund sales practices comes in many forms. It can result when a broker recommends a mutual fund with an investment objective that differs from the investment objective of the investor. It can also occur when a broker recommends the sale of a mutual fund that an investor holds to facilitate the purchase of a different mutual fund with the same investment objective.
Private placements are almost the opposite of an initial public offering (IPO). Securities that are sold pursuant to an IPO are registered with the SEC to be sold to the general public. Private placements, conversely are unregistered and have a much more narrowed scope. They are not sold to the general public. Rather they are sold to individuals that must meet specific requirements in addition to FINRA’s general suitability rule of 2111. As a result of such limitations, they tend to be less liquid and thus, riskier than securities that are registered and publicly traded.
Underwriting fraud involves schemes or attempts to mislead investors who purchase securities that are being offered to the public for the first time, whether though an IPO or a secondary offering. Such fraud may be perpetrated by investment bank(s)/broker-dealer(s) involved in underwriting or may be perpetrated by the companies going public. For example, companies and investment banks may mislead buyers about a company’s financial condition.
Issuers of new securities are obligated to provide certain material information regarding the company in the offering documents to potential investors. Moreover, it is illegal for issuers to knowingly provide misleading information about the company.
Similarly, it is illegal for a broker-dealer or registered individual to use any measure to defraud, make false statements or omit relevant information that would deceive an investor in relation to conducting transactions involving stock and other securities. Moreover, broker-dealers and registered representatives are obligated to disclose all material facts relating to any possible conflicts of interest associated with the recommendation.
The securities industry has specific rules governing securities transactions made by a broker for a customer. Brokers need prior authorization from a client before placing a securities transaction for a client. At the retail level, a broker cannot use discretion without prior written authorization from the client and the account/client being accepted by the member firm as a discretionary account.
However, there are exceptions. One such exception is the firm closing out positions to satisfy a margin call in the customer’s account.
Negligence occurs when a brokerage firm and/or its representatives fail to act in a reasonable and prudent manner. This typically happens when the broker or member firm fails to adhere to the standards of care established by the securities industry promulgated through FINRA rules and regulations. Negligence can stem from an intentional act (i.e. selling or purchasing the wrong securities) or it can stem from an omission or failure to act (i.e. failing to place a securities order).
Concentration occurs when an investment portfolio is not adequately diversified.
This typically occurs when all or the majority of a customer’s portfolio or investible assets are invested in one security or the securities of a single industry. This subjects the portfolio to risks associated with that specific security/company or industry.
Diversification is the primary tool for managing investment risks. Financial industry standards and academic studies consider any portion of an investment portfolio that exceeds ten percent of an account’s asset as being concentrated. Losses that result from over concentration may give rise to a cause of action against broker, brokerage firm or both.
FINRA rules require member firms to “establish and maintain a system of supervisory procedures (WSPs) to supervise the activities of its associated persons and the types of businesses in which it engages in.” This in short, creates a duty for a member firm and its designated supervisors to properly supervise all the activities associated with the handling of customer accounts. This necessarily includes the interaction of the broker with the client and the proper handling of the customer account.
Failure to adhere to the supervisory rules can give rise to a cause of action if a customer sustains losses from such failure to supervise.