State Laws Protecting Seniors
The Defense Perspective
For many years now, FINRA has sought to implement the central precept of arbitration as an expeditious alternative to litigation for the elderly. This blog, Part 1, will provide an overview of FINRA's pronouncements on the subject as well as initiatives adopted by the SEC and NASAA. Parts 2 & 3 will discuss the defense bar's perspective and specific state laws on the subject, respectively.
In the spring of 2016, the Department of Labor and the White House announced dramatic changes in the obligations of brokers in retirement accounts. A month before the April 2016 announcement, at SIFMA's 2016 Compliance & Legal Society Annual Seminar, the soon-to-be-announced Department of Labor fiduciary rule for retirement accounts was the subject of much conversation and analysis.
A fiduciary duty means that when a broker makes a recommendation to the customer, the broker's motivation must be in the customer's "best interest". For most brokers, that is their motivation. Where it is not, trouble can ensue. The extent to which such a duty continues after the purchase of a recommended security has resulted in decades of court decisions.
You've been swindled by your broker and learn that, not surprisingly, his firm knew nothing about it. Worse yet, you learn that he never actually opened an account for you - "investing" your money in a Ponzi scheme, a phony-baloney high interest promissory note or a cure for Alzheimer's that the FDA knows nothing about - and sending you made up brokerage firm account statements.
While it is well known that the rules of evidence do not apply in FINRA arbitrations, most panel Chairs and arbitrators in general are attorneys and will often find it hard to discard those rules completely. There are certain circumstances where the rules of evidence can provide guidance for practitioners. The highest federal court in New York - the Second Circuit Court of Appeals - has spoken to the issue of the rules of evidence in arbitration.
As attorneys who represent customers of brokerage firms, we often receive calls from potential clients who appear to have a substantive case of merit. And then we ask them when the investment was made and that often raises the question: Do statutes of limitation apply to arbitrations as they apply in courts?