Legal Terms and Concepts - Russell L. Forkey

Frequently Asked Questions About Exempt Securities Offerings

Russell L. Forkey — Sat, 11 Aug 2018 14:44:09 GMT

Do anti-fraud provisions apply?

All securities transactions, even exempt transactions, are subject to the antifraud provisions of the federal securities laws. This means that you and your company will be responsible for false or misleading statements that you or others on your behalf make regarding your company, the securities offered, or the offering. You and your company are responsible for any such statements, whether made by your company or on behalf of the company, and regardless of whether they are made orally or in writing.

The government enforces the federal securities laws through criminal, civil and administrative proceedings. Private parties also can bring actions under certain securities laws. Also, if all conditions of the exemptions are not met, purchasers may be able to return their securities and obtain a refund of their purchase price.

What is an accredited investor?

Certain securities offerings that are exempt from registration may only be offered to, or purchased by, persons who are “accredited investors.” An “accredited investor” is currently considered:

a bank, insurance company, registered investment company, business development company, or small business investment company
an employee benefit plan (within the meaning of the Employee Retirement Income Security Act) if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million
a tax exempt charitable organization, corporation or partnership with assets in excess of $5 million
a director, executive officer, or general partner of the company selling the securities
an enterprise in which all the equity owners are accredited investors
an individual with a net worth of at least $1 million, not including the value of his or her primary residence
an individual with income exceeding $200,000 in each of the two most recent calendar years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year or
a trust with assets of at least $5 million, not formed only to acquire the securities offered, and whose purchases are directed by a person who meets the legal standard of having sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment

Do state law requirements apply?

While the SEC regulates and enforces the federal securities laws, each state has its own securities regulator who enforces what are known as “blue sky” laws. If a company is selling securities, it must comply with both federal regulations and state securities laws and regulations in the states where securities are offered and sold (typically, the states where offerees and investors are based).

Under the Securities Act, if a company’s offering qualifies for certain exemptions from registration, that offering is not required to be registered or qualified by state securities regulators. Even if the offering is made under one of those exemptions, the states still have authority to investigate and bring enforcement actions for fraud, impose state notice filing requirements, and collect state fees. The failure to file, or pay filing fees regarding, any such materials may cause state securities regulators to suspend the offer or sale of securities within their jurisdiction. Companies should contact state securities regulators in the states in which they intend to offer or sell securities for further guidance on compliance with state law requirements. The following table illustrates which offerings are potentially subject to state registration or qualification under the Securities Act.

Securities Act Exemption

Under the Securities Act, is the offering potentially subject to state registration or qualification?

Section 4(a)(2) – Yes
Rule 506(b) – No
Rule 506(c) – No
Rule 504 – Yes
Regulation Crowdfunding – No
Regulation A – Tier 1 – Yes
Regulation A – Tier 2 – No
Rules 147 and 147A – Yes
Rule 701 – Yes

For the offerings that are potentially subject to state registration or qualification, each state’s securities laws have their own separate registration requirements and exemptions to registration requirements. Even if the offering is not subject to state registration or qualification, there may still be state notice filing requirements and fees.

The above information is being provided for education purposes only. It is not designed to be complete in all material respects. If you have any questions concerning the subject matter of this post, you should contact a qualified professional.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Registration of Dealers, Associated Persons and Investment Advisers in Florida – South Florida Securities Attorney

Russell L. Forkey — Fri, 01 Aug 2014 11:33:53 GMT

Registration of Dealers, Associated Persons, and Investment Advisers in the State of Florida – South Florida Securities Attorney:

Chaper 517.12 Fla.Stat. labeled Registration of dealers, associated persons, and investment advisers provides in relevant part that:

(1) No dealer, associated person, or issuer of securities shall sell or offer for sale any securities in or from offices in this state, or sell securities to persons in this state from offices outside this state, by mail or otherwise, unless the person has been registered with the Department of Financial Regulation (“office”) pursuant to the provisions of this section. The office shall not register any person as an associated person of a dealer unless the dealer with which the applicant seeks registration is lawfully registered with the office pursuant to this chapter.

(2) The registration requirements of this section do not apply to the issuers of securities exempted by s. 517.051(1)-(8) and (10).

(3) Except as otherwise provided in s. 517.061(11)(a)4., (13), (16), (17), or (19), the registration requirements of this section do not apply in a transaction exempted by s. 517.061(1)-(12), (14), and (15).

(4) No investment adviser or associated person of an investment adviser or federal covered adviser shall engage in business from offices in this state, or render investment advice to persons of this state, by mail or otherwise, unless the federal covered adviser has made a notice-filing with the office pursuant to s. 517.1201 or the investment adviser is registered pursuant to the provisions of this chapter and associated persons of the federal covered adviser or investment adviser have been registered with the office pursuant to this section. The office shall not register any person or an associated person of a federal covered adviser or an investment adviser unless the federal covered adviser or investment adviser with which the applicant seeks registration is in compliance with the notice-filing requirements of s. 517.1201 or is lawfully registered with the office pursuant to this chapter. A dealer or associated person who is registered pursuant to this section may render investment advice upon notification to and approval from the office.

(5) No dealer or investment adviser shall conduct business from a branch office within this state unless the branch office is notice-filed with the office pursuant to s. 517.1202.

Please keep in mind that this information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If the reader has any questions concerning the contents of this post, you should contact a qualified professional.

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At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Do CFPs Have to Register as an Investment Adviser in Florida – Delary, Deerfield Beach, Boca Raton and Boynton Beach, Florida FINRA Arbitration, Litigation and Elder Abuse Attorney

Russell L. Forkey — Fri, 01 Aug 2014 10:54:46 GMT

Do CFPs have to register as an Investment Adviser in Florida – Delray, Boynton Beach, Lantana, Boca Raton and West Palm Beach FINRA Arbitration, Litigation and Elder Abuse Attorney:

Any person who for compensation refers, solicits, offers, or negotiates for the purchase or sale of investment advisory services is required to be registered in Florida, regardless of their professional designation as a Investment Adviser and/or Associated Person of a broker/dealer.

Please keep in mind that this information is being provided for informational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advise. If the reader has any questions relating to this post, you should contact a qualified professional.

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Florida’s Requlation D and Rule 506 Offering Requirements – Boca Raton, West Palm Beach and Fort Lauderdale, Florida Securities Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Fri, 01 Aug 2014 10:42:33 GMT

Florida’s Regulation D and Rule 506 Offering Requirements – Boca Raton, Fort Lauderdale and West Palm Beach, Florida Securities Fraud and Misrepresentation FINRA Arbitration, Litigation and Elder Abuse Attorney:

What are Florida’s Regulation D and Rule 506 Offering requirements?

Regulation D and Rule 504 Public Offerings:

Sales must be made pursuant to the registration by Qualification (Intra-state or Merit Review) requirements of Chapter 517.081, Florida Statutes, and Rule 69W-700.001, Florida Administrative Code, and the dealer registration requirements of Chapter 517.12, Florida Statutes.

Rule 506 Filings (Offerings):

Florida does not require any Notice filing fee, or consent to service for Rule 506 Filings (Offerings), Chapter 517.071(1), Florida Statutes.

All sales of securities in Florida must be made by a properly registered Dealer (Chapter 517.12(1), Florida Statutes) or by someone utilizing an exemption provided by Chapter 517.12(3), Florida Statutes. This includes officers and employees of Rule 506 issuers.

There are two exemptions available under Chapter 517.12(3), Florida Statutes, for Issuers of Rule 506 Offerings:

1. Chapter 517.061(19) and 517.021(6)(b)6, Florida Statutes, and Rule 69W-500.016, Florida Administrative Code, requiring the offer and sale to be made by a bona fide employee of the issuer.

2. Chapter 517.061(11) and 517.021(6)(b)6, Florida Statutes, and Rule 69W-500.001-007, Florida Administrative Code, requiring the sale to be made in reliance upon a limited offering exemption.

Please keep in mind that the above information is being provided for informational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advise. If the reader has any questions concerning the contents of this post, you should contact a qualified professional.

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FAQ’s Relating to a Brokerage Account Transfer – Boca Raton, Florida Broker/Dealer FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sat, 05 Jul 2014 23:03:09 GMT

Fort Lauderdale, Boca Raton and West Palm Beach, Florida Broker/Dealer FINRA Arbitration and Litigation Attorney:

FAQ’s You Should Consider Asking Before You Initiate Your Account Transfer:

Discussing the transfer process with your new firm is the best way to become familiar with the account transfer process. If the answers to your questions are not clear, ask the new firm for a written response. You should ask questions, such as:

Can you explain the transfer process to me?
Can you tell me what fees I should expect to pay (including transfer fees and any other fees associated with the account (e.g. annual fees, brokerage commissions)?
What documents or information do I need to transfer my account to your firm?
What do I need to do to start the transfer process and what should I expect after that?
What is the anticipated length of the transfer process given the specific type of account (such as cash, margin, IRA, custodial) and the assets held (such as stocks, bonds, options, limited partnership interests)?
Can you identify any issues that may cause a delay during the account transfer process?
How and when will you inform me that the transfer process is complete?
Does your firm have any specific policies or constraints that might impact the account transfer? For example, if you have a margin account, ask if the new firm will accept a margin account and, if so, what its minimum requirements are. In short, make sure the new firm is a good fit for you as a customer before you attempt to transfer your account.
Are there any restrictions on transactions I can execute during the transfer process? For example, buying and selling securities during the account transfer process can complicate and delay the transfer.
Can you identify any securities or assets in my account that may not transfer and how they will be handled? Before initiating the transfer process, ask your new firm which assets in your account may not transfer.

These securities may include:

securities sold exclusively by your old firm;
mutual funds or money market funds not available at the new firm, typically because the new firm does not maintain a relationship or arrangement with the fund necessary to hold the asset;
limited partnerships that are private placements, typically because the asset is held at the issuer, not the broker or investment adviser who sold it to the customer;
fractional shares of securities; and
bankrupt securities.

You will need to make an informed decision regarding these non-transferable assets.

You may be able to simply sell the non-transferable asset and transfer the cash proceeds, but you should consult your tax adviser first because selling the asset may affect your taxes. Also, before selling a mutual fund and buying a similar fund at your new firm, find out the fees that will be charged for the transactions by the old and new firms.
If you choose to leave the non-transferable assets at the old firm in an inactive account, ask whether a fee will be charged.
You may be able to take physical delivery of assets directly from your old firm. However, this may not be a wise choice. Taking possession of a physical security poses risks, such as the security being lost or stolen. Lost or stolen securities require significant time and money to replace. Also, it usually takes longer to sell a physical security than one your broker or investment adviser already holds electronically.

If you own some of these non-transferable securities, it may take longer to complete a transfer while you decide how to handle them. Your old firm is required to transfer whatever securities or assets it can through ACATS and ask you what you would like to do with the others.

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Mutual Fund Switching – South Florida Mutual Fund Fraud and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sat, 04 Jan 2014 21:36:54 GMT

Unsuitable and Inappropriate Mutual Fund Switching – Stuart, Hope Sound, Jupiter, West Palm Beach, Lantana, Delray Beach, Lake Worth and Boca Raton, Florida FINRA Arbitration, Mediation and Litigation Attorney:

Mutual Fund Switching:

Mutual fund switching is the moving of assets from one mutual fund to another, either within the same fund family or between different fund families. There is no charge for switching within a no-load family of mutual funds. A sales charge might have to be paid when switching from on load fund to another even within the same family of funds.

Switching usually is initiated by the mutual fund shareholder (customer). However, there have been instances where account executives have solicited unnecessary and unsuitable switches as a means of generating commissions at the expense of the client.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If you have any questions concerning the contents of this post, you should contact a qualified professional.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

FAQ’s About Asset Allocation – South Florida Improper and Unsuitable Asset Allocation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 25 Dec 2013 23:17:44 GMT

South Florida Improper and/or Unsuitable Asset Allocation FINRA Arbitration, Federal and State Court Litigation Attorney:

Asset Allocation – Asset Allociation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. The process of determining which mix of assets to hold in your portfolio is a very personal one. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk.

Time Horizon – Your time horizon is the expected number of months, years, or decades you will be investing to achieve a particular financial goal. An investor with a longer time horizon may feel more comfortable taking on a riskier, or more volatile, investment because he or she can wait out slow economic cycles and the inevitable ups and downs of our markets. By contrast, an investor saving up for a teenager’s college education would likely take on less risk because he or she has a shorter time horizon.

Risk Tolerance – Risk tolerance is your ability and willingness to lose some or all of your original investment in exchange for greater potential returns. An aggressive investor, or one with a high-risk tolerance, is more likely to risk losing money in order to get better results. A conservative investor, or one with a low-risk tolerance, tends to favor investments that will preserve his or her original investment. In the words of the famous saying, conservative investors keep a “bird in the hand,” while aggressive investors seek “two in the bush.”

Risk versus Reward:

When it comes to investing, risk and reward are inextricably entwined. You’ve probably heard the phrase “no pain, no gain” – those words come close to summing up the relationship between risk and reward. Don’t let anyone tell you otherwise: All investments involve some degree of risk. If you intend to purchases securities – such as stocks, bonds, or mutual funds – it’s important that you understand before you invest that you could lose some or all of your money.

The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in asset categories with greater risk, like stocks or bonds, rather than restricting your investments to assets with less risk, like cash equivalents. On the other hand, investing solely in cash investments may be appropriate for short-term financial goals.

The solicitation, by your broker/dealer or account executive of improper asset in your account, taking into consideration your investment objectives, age, income and investment experience, may allow you to recover your investment losses. This is especially true in a volatile or adversely trending market. If you believe that you have suffered investment losses as a result of improper asset allocation, you should contact a qualified professional.

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Insurance Policy (Contract) Misstatement or Omission – South Florida Insurance and Investment Fraud and Misrepresentation Litigation and Arbitration Attorney

Russell L. Forkey — Sat, 21 Dec 2013 12:07:10 GMT

South Florida Insurance Dispute and Litigation Attorney:

The general rule in Florida is that a misstatement in, or omission from, an application for insurance need not be intentional before recovery may be denied pursuant to 627.409. Florida Statute 627.409 provides that :

(1) Any statement or description made by or on behalf of an insured or annuitant in an application for an insurance policy or annuity contract, or in negotiations for a policy or contract, is a representation and is not a warranty. A misrepresentation, omission, concealment of fact, or incorrect statement may prevent recovery under the contract or policy only if any of the following apply:

(a) The misrepresentation, omission, concealment, or statement is fraudulent or is material either to the acceptance of the risk or to the hazard assumed by the insurer.

(b) If the true facts had been known to the insurer pursuant to a policy requirement or other requirement, the insurer in good faith would not have issued the policy or contract, would not have issued it at the same premium rate, would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss.

(2) A breach or violation by the insured of any warranty, condition, or provision of any wet marine or transportation insurance policy, contract of insurance, endorsement, or application therefor does not void the policy or contract, or constitute a defense to a loss thereon, unless such breach or violation increased the hazard by any means within the control of the insured.

The courts, in Florida, have explained that section 627.409(1) allows for the voiding of a policy for misrepresentation or omission without regard to whether the same was intentional. This case law relating to insurance policies is consistent with the general principle in contract law that, to obtain rescission of a contract, based upon misrepresentation, it is not necessary that the party making the misrepresentation should have known that it was false. Innocent misrepresentations are sufficient, for though the misrepresentations may have been made innocently, it would be unjust and inequitable to permit a person who has made false representations, even innocently, to retain the fruits of a bargain induced by such misrepresentation. Although the law has also determined that parties are free to ‘contract-out’ or ‘contract around’ state or federal law with regard to an insurance contract, so long as there is nothing void as to public policy or statutory law about such a contract.

If, as the insured, you are dealing with an issue concerning a claim misrepresentation by the insurance carrier, you should contact a qualified attorney to discuss you specific factual circumstances verses the contract provisions to see if the fact in contention does in fact void the coverage contained in the policy.

Please keep in mind that this information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If the reader has any questions or comments concerning this post, you should contact a qualified professional.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of insurance and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

FAQ Regarding Interpretation of Insurance Contracts, Including Annuity Contracts – South Florida Insurance Litigation and Arbitration Attorney

Russell L. Forkey — Sat, 21 Dec 2013 11:45:09 GMT

FAQ’s Relative to the Interpretation of all Types of Insurance Contracts, Including Variable and Fixed Annuity Insurance Contracts – Florida Insurance Litigation and Arbitration Attorney:

Florida law requires that insurance contracts are construed according to their plain meaning and, if a policy provision is clear and unambiguous, it should be enforced according to its terms. When a contract of insurance is subject to multiple interpretations, the policy language should be construed liberally in favor of the insured and strictly against the insurer as author of the contract.

If, as an insured, you make a claim which is denied by your insurance carrier, it is imperative that you contact qualified counsel to make sure that the denial is justified. This is especially ture where the policy provision is subject to multiple interpretations.

Please be advised that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus it should not be relied upon as legal or investment advice.

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Florida Shareholder Notice and Consent Requirements and Dissenters’ Rights – Broward and Palm Beach County, Florida Corporate and Business Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 08 Dec 2013 01:55:11 GMT

Florida Shareholder Notice and Consent Requirements and Dissenters’ Rights – South Florida Corporate Litigation and Arbitration Attorney:

Shareholder notice and consent requirements and dissenters’ rights statutes are intended to insure that directors do not fundamentally change the nature of the shareholders’ investments without the check and balance of informed shareholder approval, and the opportunity for dissenters to withdraw from the corporation. A critical part of Florida’s statutory scheme giving dissenters the right to withdraw from the corporation is section 607.1301(2), which defines the term “fair value” for purposes of the dissenters’ rights statute. ‘Fair value,’ with respect to a dissenter’s shares, means the value of the shares as of the close of business on the day prior to the shareholders’ authorization date, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of corporate and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

Prohibited Activities of Corporate Officers and Directors – Florida Corporate Misconduct Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 08 Dec 2013 01:08:24 GMT

Prohibited Activities of Corporate Officers and Directors – Broward and Palm Beach County, Florida Corporate Misconduct Litigation and Arbitration Attorney:

It is a cardinal principle, in Florida, that an officer or director of a corporation will not be permitted to make profit out of his official position and because of their fiduciary character, officers and directors will not be permitted to acquire for their own advantage interests adverse or antagonistic to the corporation. While it is true that corporate officers or directors are not precluded, because of the fiduciary nature of their position, from entering into and engaging in another similar enterprise separate from the corporation, they must refrain from interfering with the business of the corporation and they must act in good faith.

Examples of such activity include:

1. inducing all of old corporation’s employees to leave the company and work for the the former officer’s or director’s new company.

2. unlawfully transferring property of the old corporation to the former officer’s or director’s new company.

3. selling and performing services under the old corporation’s trade name and billing such customers under name of the officer’s or director’s new company,

4. utilizing the assets, equipment, facilities and goodwill of corporate of the old corporation in promoting the business of the former officer and director.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as providing legal or investment advice. If the reader has any questions concerning the contents of this post, you should contact a qualified professional.

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Accountant’s Liability to Third Parties – Broward and Palm Beach Florida Accounting Negligence Litigation and Arbitration Attorney

Russell L. Forkey — Sat, 07 Dec 2013 21:40:52 GMT

Accountant’s Liability to Third Parties – Florida Accounting Negligence Litigation and Arbitration Attorney – Russell L. Forkey, Esq.

WHEN AN ACCOUNTANT FAILS TO EXERCISE REASONABLE AND ORDINARY CARE IN PREPARING THE FINANCIAL STATEMENTS OF HIS CLIENT AND WHERE THAT ACCOUNTANT PERSONALLY DELIVERS AND PRESENTS THE STATEMENTS TO A THIRD PARTY TO INDUCE THAT THIRD PARTY TO LOAN TO OR INVEST IN THE CLIENT, KNOWING THAT THE STATEMENTS WILL BE RELIED UPON BY THE THIRD PARTY IN LOANING TO OR INVESTING IN THE CLIENT, IS THE ACCOUNTANT LIABLE TO THE THIRD PARTY IN NEGLIGENCE FOR THE DAMAGES THE THIRD PARTY SUFFERS AS A RESULT OF THE ACCOUNTANT’S FAILURE TO USE REASONABLE AND ORDINARY CARE IN PREPARING THE FINANCIAL STATEMENTS, DESPITE A LACK OF PRIVITY BETWEEN THE ACCOUNTANT AND THE THIRD PARTY?

The Florida Supreme Court answered this question in the affirmative in the case of First Florida Bank, N.A. v. Max Mitchell & Co., 558 So. 2d 9 (Fla. 1990). In this matter, the court provided two examples to illustrate this circumstance.

(1): The court held that the Restatement (Second) of Tort § 552 governing information negligently supplied for the guidance of others has been adopted to apply to accountants so that when an accountant fails to exercise reasonable and ordinary care in preparing financial statements of the client and accountant personally delivers and presents statements to third party to induce that third party to loan or invest in client, knowing that statements will be relied upon by third party in loaning to or investing in client, accountant is liable to third party in negligence for damages third party suffers as a result of accountant’s failure to use reasonable and ordinary care in preparing financial statements, despite lack of privity (direct relationship) between accountant and third party.

(2): Accountant, who prepared audits without knowing they would be used to induce reliance of bank to approve line of credit for client, but who actually negotiated loan on behalf of client and personally delivered financial statements to bank with knowledge that it would rely upon them in considering to make loan, was liable to bank in negligence for damages bank suffered as a result of accountant’s failure to use reasonable and ordinary care in preparing financial statements, despite lack of privity.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of accounting, negligence and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

Financial Elder Abuse – Financial Elder Exploitation – Florida Litigation and FINRA Arbitration Attorney

Russell L. Forkey — Mon, 25 Nov 2013 23:47:38 GMT

Financial Elder Abuse and Elder Exploitation – Boca Raton, Delray Beach, West Palm Beach and Fort Lauderdale, Florida Litigation and Arbitration Attorney:

Florida Statute Section 415.1111 grants to vulnerable (elder) adults a cause of action as a result of financial and other types of abuse. It provides that a vulnerable adult who has been abused, neglected, or exploited as specified in the law has a cause of action against any perpetrator and may recover actual and punitive damages for such abuse, neglect, or exploitation. The action may be brought by the vulnerable adult, or that person’s guardian, by a person or organization acting on behalf of the vulnerable adult with the consent of that person or that person’s guardian, or by the personal representative of the estate of a deceased victim without regard to whether the cause of death resulted from the abuse, neglect, or exploitation. The action may be brought in any court of competent jurisdiction to enforce such action and to recover actual and punitive damages for any deprivation of or infringement on the rights of a vulnerable adult. A party who prevails in any such action may be entitled to recover reasonable attorney’s fees, costs of the action, and damages. The remedies provided in this section are in addition to and cumulative with other legal and administrative remedies available to a vulnerable adult.

As the elder population in Florida has increased, incidents of financial elder abuse has accelerated at an alarming rate. An area of financial elder abuse that has recently exploded is the twisting (unnecessary sale and purchase of annuities) of variable and fixed annuities.

Please keep in mind that this information is being provided for informational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If after reviewing this post you have any questions, you should contact a qualified professional.

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Post-Employment Restrictive Covenants – South Florida Restrictive Covenant Litigation and Arbitration Attorney

Russell L. Forkey — Sun, 10 Nov 2013 22:28:00 GMT

Post-Employment Restrictive Covenants – Insurance and other Businesses:

This post provides a general discussion concerning post-employment restrictive covenants that may be found in employment agreements in the State of Florida. The statute governing this issue is Florida Statute 542.335.

Florida, by statute, has determined that post-employment restrictive covenant agreements are valid restraints of trade or commence under certain conditions. Specifically, section 542.335, Florida Statutes (2005), which took effect on July 1, 1996, contains a comprehensive framework for analyzing, evaluating and enforcing restrictive covenants contained in employment contracts. A violation of an enforceable restrictive covenant creates a presumption of irreparable injury. Section 542.335 employs the term “restrictive covenants” and includes all contractual restrictions such as noncompetition/nonsolicitation agreements, confidentiality agreements, exclusive dealing agreements, and all other contractual restraints of trade. If valid, a restrictive covenant may be enforced by way of temporary and permanent injunctive relief. § 542.335(1)(j), Fla. Stat. (2005).

Section 542.335(1), Florida Statutes, permits enforcement of contracts that restrict or prohibit competition, but only “so long as such contracts are reasonable in time, area, and line of business….” The statute also requires “that any restrictive covenant be set forth in a writing signed by the person against whom enforcement is sought, and that the restraint be shown to be reasonably necessary to protect a ‘legitimate business interests [sic]’ justifying the restriction.” A “legitimate business interest” includes “substantial relationships with specific prospective or existing customers … or clients.” § 542.335(1)(b) 3., Fla. Stat. (2005). The party seeking enforcement of the non-compete agreement must present a prima facie case that the restrictions are reasonably necessary to protect its legitimate business interests. § 542.335(1)(c), Fla. Stat. (2005). The opposing party then has the burden of proving the contractual restraint is overbroad, overlong, or otherwise not reasonably necessary to support the restriction.

Please keep in mind that this information is being provided for educational purposes only. Thus, it is not designed to be complete in all material respects. Therefore, it should not be relied upon as legal or investment or legal advice. If you have any questions concerning the contents of this post, please consult a qualified professional.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of insurance and securities law, as well as litigation involving covenants not to compete, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

Common Stock, Preferred Stock, Corporate Bonds, Municipal Bonds, ETF’s and Mutual Funds – South Florida Securities and Investment Fraud, Negligence and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 06 Nov 2013 12:08:40 GMT

Common Stocks, Preferred Stocks, Corporate Bonds, Municipal Bonds, Promissory Notes, Exchange-Traded Funds (ETF’s), and Mutual Funds – South Florida Securities and Investment Fraud, Negligence and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney:

The elements of a breach of fiduciary duty action are (1) the existence of a fiduciary duty and (2) the breach of that duty that was the proximate cause of the plaintiff’s damages. A fiduciary relationship exists when confidence is reposed by one party and trust accepted by the other. Such a relationship exists where confidence is reposed on one side and there is resulting superiority and influence on the other. When a fiduciary relationship has not been created by an express agreement, the question of whether the relationship exists generally depends upon the specific facts and circumstances surrounding the relationship of the parties in a transaction in which they are involved.

The law is clear that a broker owes a fiduciary duty of care and loyalty to a securities investor. The type and extent of this duty is fact specific. In other words, your relationship with, in the case, your broker/dealer and/or account executive will be determinative of the type of duty that you are owed. However, please keep in mind that the extent of this duty is organic. It is constantly changing. It is for this reason that your specific circumstances need to be reviewed by a qualified professional.

Fiduciary duties associated with a non-discretionary account. A non-discretionary account is an account in which the customer rather than the broker determines which purchases and sales to make. In a non-discretionary account each transaction is viewed singly. In such cases the broker is bound to act in the customer’s interest when transacting business for the account; however, all duties to the customer cease when the transaction is closed. The duties associated with a non-discretionary account include, but may not necessarily limited to: (1) the duty to recommend a stock only after studying it sufficiently to become informed as to its nature, price and financial prognosis; (2) the duty to carry out the customer’s orders promptly in a manner best suited to serve the customer’s interests; (3) the duty to inform the customer of the risks involved in purchasing or selling a particular security; (4) the duty to refrain from self-dealing or refusing to disclose any personal interest the broker may have in a particular recommended security; (5) the duty not to misrepresent any fact material to the transaction; and (6) the duty to transact business only after receiving prior authorization from the customer.

Of course the precise manner in which a broker performs these duties will depend to some degree upon the intelligence and personality of his customer. For example, where the customer is uneducated or generally unsophisticated with regard to financial matters, the broker will have to define the potential risks of a particular transaction carefully and cautiously. Conversely, where a customer fully understands the dynamics of the stock market or is personally familiar with a security, the broker’s explanation of such risks may be merely perfunctory. In either case, however, the broker’s responsibility to his customer ceases when the transaction is complete. A broker has no continuing duty to keep abreast of financial information which may affect his customer’s portfolio or to inform his customer of developments which could influence his investments. Although a good broker may choose to perform these services for his customers, he is under no legal obligation to do so.

Absent from the above list is the duty, on the part of the broker, to engage in a particular course of trading. So long as a broker performs the transactional duties outlined above, he and his customer may embark upon a course of heavy trading in speculative stocks or in-out trading as well as upon a course of conservative investment in blue chip securities.

Unlike the broker who handles a non-discretionary account, the broker handling a discretionary account becomes the fiduciary of his customer in a broad sense. Such a broker, while not needing prior authorization for each transaction, must (1) manage the account in a manner directly comporting with the needs and objectives of the customer as stated in the authorization papers or as apparent from the customer’s investment and trading history; (2) keep informed regarding the changes in the market which affect his customer’s interest and act responsively to protect those interests; (3) keep his customer informed as to each completed transaction; and (5) explain forthrightly the practical impact and potential risks of the course of dealing in which the broker is engaged.

Although no particular type of trading is required of brokers handling discretionary accounts, most concentrate on conservative investments with few trades usually in blue chip growth stocks. Where a broker engages in more active trading, particularly where such trading deviates from the customer’s stated investment goals or is more risky than the average customer would prefer, the broker has an affirmative duty to explain the possible consequences of his actions to his customer. This explanation should include a discussion of the effect of active trading upon broker commissions and customer profits.

Between the purely non-discretionary account and the purely discretionary account there is a hybrid-type account which usually exists between most customers and their broker. Such an account is one in which the broker has usurped actual control over a technically non-discretionary account. In such cases the courts have held that the broker owes his customer the same fiduciary duties as he would have had the account been discretionary from the moment of its creation.

In Hecht v. Harris, 430 F.2d 1202 (9th Cir. 1970), the plaintiff, a 77 year old widow, opened a non-discretionary account with a major brokerage firm. Consistent with the practice in such accounts plaintiff received confirmation slips of each transaction and monthly statements on the status of her account. In addition, she spoke personally with the defendant broker several times a week. Nonetheless, the court held that the broker was liable to plaintiff for churning her account on the ground that he had traded excessively without informing plaintiff of the potential hazards involved in such a course of trading. Since the plaintiff was informed, for the most part, of the individual transactions in her account, the court’s holding assumed that the defendant owed plaintiff the additional fiduciary duty to explain the risks of pursuing a particular course of trading. That assumption derived from the court’s finding that the broker had taken full control over the plaintiff’s account and thus owed her those fiduciary duties normally associated with discretionary accounts.

In determining whether a broker has assumed control of a non-discretionary account the courts weigh several factors. First, the courts examine the age, education, intelligence and investment experience of the customer. Where the customer is particularly young, old, or naive with regard to financial matters, the courts are likely to find that the broker assumed control over the account. Second, if the broker is socially or personally involved with the customer, the courts are likely to conclude that the customer relinquished control because of the relationship of trust and confidence. Conversely, where the relationship between the broker and the customer is an arms-length business relationship, the courts are inclined to find that the customer retained control over the account. Third, if many of the transactions occurred without the customer’s prior approval, the courts will often interpret this as a serious usurpation of control by the broker. Fourth, if the customer and the broker speak frequently with each other regarding the status of the account or the prudence of a particular transaction, the courts will usually find that the customer, by maintaining such active interest in the account, thereby maintained control over it.

Importantly, the category which you fall in is not something that you should try to figure out yourself. You should attempt to make this determination in conjunction with a qualified professional.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as providing legal or investment advice. If you have any questions concerning this post, you should contact a qualified professional.

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Broker – Dealers (How to Identify One) – Florida Securities and Investment Fraud and Mismanagement FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sat, 12 Oct 2013 10:04:02 GMT

Miami, Fort Lauderdale, Boca Raton and West Palm Beach Florida Investment Fraud and Misrepresentation FINRA Arbitration, AAA Arbitration, JAMS Arbitration, State and Federal Court Litigation Attorney, Russell L. Forkey, Esq.

Who can be classified as a “Broker”.

Before considering if you were impacted by broker/dealer fraud, misrepresentation, mismanagement, breach of fiduciary duty or negligence, it is necessary for the reader to understand what constitutes a broker/dealer and what the difference is between the two. Section 3(a)(4)(A) of the Act generally defines a “broker” broadly as any person engaged in the business of effecting transactions in securities for the account of others.

Sometimes you can easily determine if someone is a broker. For instance, a person who executes transactions for others on a securities exchange clearly is a broker. However, other situations are less clear. For example, each of the following individuals and businesses may need to register as a broker, depending on a number of factors, which are too complicated to discuss herein. A few examples are:

“finders,” “business brokers,” and other individuals or entities that engage in the following activities:

Finding investors or customers for, making referrals to, or splitting commissions with registered broker-dealers, investment companies (or mutual funds, including hedge funds) or other securities intermediaries;
Finding investment banking clients for registered broker-dealers;
Finding investors for “issuers” (entities issuing securities), even in a “consultant” capacity;
Engaging in, or finding investors for, venture capital or “angel” financings, including private placements;
Finding buyers and sellers of businesses (i.e., activities relating to mergers and acquisitions where securities are involved);
investment advisers and financial consultants;
foreign broker-dealers that cannot rely on Rule 15a-6 under the Act (discussed below);
persons that operate or control electronic or other platforms to trade securities;
persons that market real-estate investment interests, such as tenancy-in-common interests, that are securities;
persons that act as “placement agents” for private placements of securities;
persons that market or effect transactions in insurance products that are securities, such as variable annuities, or other investment products that are securities;
persons that effect securities transactions for the account of others for a fee, even when those other people are friends or family members;
persons that provide support services to registered broker-dealers; and
persons that act as “independent contractors,” but are not “associated persons” of a broker-dealer.

In order to determine whether any of these individuals (or any other person or business) is a broker, one would look at the activities that the person or business actually performs. The facts associated with the activity is important. Many times, it is necessary to hire a qualified professional to assist in making the determination as to whether or not the individual or business is functioning as a broker.

Who can be classified as a “Dealer”.

Unlike a broker, who acts as agent, a dealer acts as principal. Section 3(a)(5)(A) of the Act generally defines a “dealer” as:

any person engaged in the business of buying and selling securities for his own account, through a broker or otherwise.

The definition of “dealer” does not include a “trader,” that is, a person who buys and sells securities for his or her own account, either individually or in a fiduciary capacity, but not as part of a regular business. Individuals who buy and sell securities for themselves generally are considered traders and not dealers.

Sometimes you can easily tell if someone is a dealer. For example, a firm that advertises publicly that it makes a market in securities is obviously a dealer. Other situations can be less clear. For instance, each of the following individuals and businesses may need to register as a dealer, depending on a number of factors:

a person who holds himself out as being willing to buy and sell a particular security on a continuous basis;
a person who runs a matched book of repurchase agreements; or
a person who issues or originates securities that he also buys and sells.

Broker/dealers, who operate in their capacities as such, are subject to a substantial number of federal and state statutes, rules and regulations designed to protect members of the investing public. If you have lost money as a result of your association with a broker/dealer, you should contact a qualified professional to immediately review your particular situation. Time is not on your side.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects and that any statutes, rules or regulations referenced may be modified, from time to time. Thus, it should not be relied upon as legal or investment advice.

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Master Limited Partnership v. Public Limited Partnership – Florida Limited Partnership Federal, State and Arbitration Attorney

Russell L. Forkey — Sun, 06 Oct 2013 11:07:39 GMT

Master Limited Partnership v. Public Limited Partnership – Florida Limited Partnership – Federal and State Litigation Attorney: Fraud in the Inducement, breach of the partnership agreement, mismanagement of the partnership, self-dealing and fraud in the operation of the partnership.

A limited partnership is a form of legal entity created under the law of a particular state. In Florida, the statute dealing with limited partnerships is Florida Statute Sections 620.1101 through 620.2205. To review a complete copy of this state, please follow the highlighted link:

http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0620/0620PartIContentsIndex.html&StatuteYear=2013&Title=%2D%3E2013%2D%3EChapter%20620%2D%3EPart%20I

Within the universe of limited partnerships there are two disused in this post – Master Limited Partnership v. Public Limited Partnerships. A Master Limited Partnership (MLP) is a public limited partnership composed of corporate assets spun off (roll out) or private limited partnerships (roll up) with income, capital gains and/or tax shelter benefits. The interest evidencing ownership in a MLP are represented by depositary receipts traded in the secondary market. Thus, this type of investment enjoys some type of liquidity.

A Public Limited Partnership is a form of limited partnership that is registered with the Securities and Exchange Commission and offered to the public through registered broker/dealers. This type of partnership includes business models based upon assets such as real estate, oil and gas, and equipment leasing. Consequently, these partnerships may be oriented to producing income or capital gains, or, within passive income rules, to generate tax advantages for limited partners. The number of investors in such a partnership is limited only by the sponsor’s desire to cap the funds raised. A public limited partnership, which does not have an active secondary market, is distinguished from a private limited partnership, which is subject to its own rules.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be compete in all material respects. Thus, it should not be relied upon as legal or investment advice. If the reader has any questions concerning the contents of this post, you should contact a qualified professional.

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“EB-5” Private Placement and Other Investment Abuses – Florida Private Placement and Other Investment Abuses Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 02 Oct 2013 09:31:36 GMT

Investment Scams That Exploit The Immigrant Investor Program:

Recently, the United States Securities and Exchange Commission’s Office of Investor Education and Advocacy and the United States Citizenship and Immigration Services (USCIS) jointly issued an Investor Alert to warn individual investors about fraudulent investment scams that exploit the Immigrant Investor Program, also known as “EB-5.”

The EB-5 program provides certain foreign investors who can demonstrate that their investments are creating jobs in this country, with a potential avenue to lawful permanent residency in the United States. Business owners apply to USCIS to be designated as “regional centers” for the EB-5 program. These regional centers offer investment opportunities in “new commercial enterprises” that may involve securities offerings. Through EB-5, a foreign investor who invests a certain amount of money that is placed at risk, and creates or preserves a minimum number of jobs in the United States, is eligible to apply for conditional lawful permanent residency. Toward the end of the two-year period of conditional residency, the foreign investor is eligible to apply to have the conditions on their lawful permanent residency removed, if he or she can establish that the job creation requirements have been met. Foreign investors who invest through EB-5, however, are not guaranteed a visa or to become lawful permanent residents of the United States. For more details, read the EB-5 Immigrant Investor section of USCIS’s website at www.uscis.gov.

The fact that a business is designated as a regional center by USCIS does not mean that USCIS, the SEC, or any other government agency has approved the investments offered by the business, or has otherwise expressed a view on the quality of the investment. The SEC and USCIS are aware of attempts to misuse the EB-5 program as a means to carry out fraudulent securities offerings. In a recent case, SEC v. Marco A. Ramirez, et al., the SEC and USCIS worked together to stop an alleged investment scam in which the SEC claims that the defendants, including the USA Now regional center, falsely promised investors a 5% return on their investment and an opportunity to obtain an EB-5 visa. The promoters allegedly started soliciting investors before USCIS had designated the business as a regional center. The SEC alleged that while the defendants told investors their money would be held in escrow until USCIS approved the business as eligible for EB-5, the defendants misused investor funds for personal use such as funding their Cajun-themed restaurant. According to the SEC’s complaint, the investors did not obtain even conditional visas as a result of their investments through the USA Now regional center.

In another case, SEC v. A Chicago Convention Center, et al., the SEC and USCIS coordinated to halt an alleged $156 million investment fraud. The SEC alleged that an individual and his companies used false and misleading information to solicit investors in the “World’s First Zero Carbon Emission Platinum LEED certified” hotel and conference center in Chicago, including falsely claiming that the business had acquired all necessary building permits and that the project was backed by several major hotel chains. According to the SEC’s complaint, the defendants promised investors that they would get back any administrative fees they paid for their investments if their EB-5 visa applications were denied. The defendants allegedly spent more than 90 percent of the administrative fees, including some for personal use, before USCIS adjudicated the visa applications.

As with any investment, it is important to research thoroughly any securities or other type of offering that purports to be affiliated with EB-5. At a minimum, you should take these steps:

Confirm that the regional center has been designated by USCIS. If you intend to invest through a regional center, check the list of current regional centers on USCIS’s website at www.uscis.gov. If the regional center is not on the list, exercise extreme caution. Even if it is on the list, understand that USCIS has not endorsed the regional center or any of the investments it offers.

Obtain copies of documents provided to USCIS. Regional centers must file an initial application (Form I-924) to obtain USCIS approval and designation, and must submit an information collection supplement (Form I-924A) at the end of every calendar year. Ask the regional center for copies of these forms and supporting documentation provided to USCIS.

Request investment information in writing. Ask for a copy of the investment offering memorandum or private placement memorandum from the issuer. Examine it carefully and research similar projects in evaluating the proposal. Follow up with any questions you may have. If you do not understand the information in the document or the issuer is unwilling or unable to answer your questions to your satisfaction, do not invest.

Ask if promoters are being paid. If there are supposedly unaffiliated consultants, lawyers, or agencies recommending or endorsing the investment, ask how much money or what type of benefits they expect to receive in connection with recommending the investment. Be skeptical of information from promoters that is inconsistent with the investment offering memorandum or private placement memorandum from the issuer.

Seek independent verification. Confirm whether claims made about the investment are true. For example, if the investment involves construction of commercial real estate, check county records to see if the issuer has obtained the proper permits and whether state and local property tax assessments correspond with the values the regional center attributes to the property. If other companies have purportedly signed onto the project, go directly to those companies for confirmation.

Examine structural risk. Understand that you may be investing in a new commercial enterprise that has no assets and has been established to loan funds to a company that will use the funds to develop projects. Carefully examine loan documents and offering statements to determine if the loan is secured by any collateral pledged to investors.

Consider the developer’s incentives. EB-5 regional center principals and developers often make capital investments in the projects they manage. Recognize that if principals and developers do not make an equity investment in the project, their financial incentives may not be linked to the success of the project.

Look for warning signs of fraud. Beware if you spot any of these hallmarks of fraud:

Promises of a visa or becoming a lawful permanent resident. Investing through EB-5 makes you eligible to apply for a conditional visa, but there is no guarantee that USCIS will grant you a conditional visa or subsequently remove the conditions on your lawful permanent residency. USCIS carefully reviews each case and denies cases where eligibility rules are not met. Guarantees of the receipt or timing of a visa or green card are warning signs of fraud.

Guaranteed investment returns or no investment risk. Money invested through EB-5 must be at risk for the purpose of generating a return. If you are guaranteed investment returns or told you will get back a portion of the money you invested, be suspicious.

Overly consistent high investment returns. Investments tend to go up and down over time, particularly those that offer high returns. Be suspicious of an investment that claims to provide, or continues to generate, high rates of return regardless of overall market conditions.

Unregistered investments. Even though a regional center may be designated as a regional center by USCIS, most new commercial enterprise investment opportunities offered through regional centers are not registered with the SEC or any state regulator. When an offering is unregistered, the issuer may not provide investors with access to key information about the company’s management, products, services, and finances that registration requires. In such circumstances, investors should obtain additional information about the company to help ensure that the investment opportunity is bona fide.

Unlicensed sellers. Federal and state securities laws require investment professionals and their firms who offer and sell investments to be licensed or registered. Designation as a regional center does not satisfy this requirement. Many fraudulent investment schemes involve unlicensed individuals or unregistered firms.

Layers of companies run by the same individuals. Some EB-5 regional center investments are structured through layers of different companies that are managed by the same individuals. In such circumstances, confirm that conflicts of interest have been fully disclosed and are minimized.

If your investment through EB-5 turns out to be in a fraudulent securities offering, you may lose both your money and your path to lawful permanent residency in the United States. Carefully vet any EB-5 offering before investing your money and your hope of becoming a lawful permanent resident of the United States.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as providing legal or investment advice. If the reader has any questions concerning the contents of this alert, you should contact a qualified professional.

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New Issue – Florida Securities and Investment Loss FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sun, 22 Sep 2013 21:31:02 GMT

New Issue – South Florida Common and Preferred Stock and Bond Investment Loss – FINRA Arbitration and Litigation Attorney:

A “New Issue” is a stock or bond being offered to the investing public for the first time, the distribution of which is covered by various Securities and Exchange Commission (SEC) rules and regulations. New issues may be initial public offerings by previously private companies or additional stock or bond issues by companies already public and often listed on an exchange. New public offerings must be registered with the SEC. Private placements avoid SEC registration but are subject to its own set of SEC rules and regulations.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If the reader has any questions concerning the contents of this post, you should contact a qualified professional.

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Registration Rules for Municipal Advisors – Florida Municipal Bond Litigation Attorney

Russell L. Forkey — Thu, 19 Sep 2013 23:57:43 GMT

SEC Approves Registration Rules for Municipal Advisors

The Securities and Exchange Commission recently voted to adopt rules establishing a permanent registration regime for municipal advisors as required by the Dodd-Frank Act. The rule is currently slated to become effective 60 days after publication in the Federal Register.

The Final Rule:

The Commission has adopted a final rule requiring municipal advisors to register with the SEC. In particular, the rule clarifies who is and isn’t a “municipal advisor” and offers guidance on when a person is providing “advice” for purposes of the municipal advisor definition.

The final rule exempts employees and appointed officials of municipal entities from registration, and narrows the application of the term “investment strategies” to apply only to the investment of proceeds from the sale of municipal securities rather than to all public funds.

Exemptions provided under the rule are based on the activities of the advisor rather than the type of market participant. The SEC staff believes this approach avoids giving certain market participants an inappropriate competitive advantage.

Additionally, instead of the proposed approach that would have required individuals associated with registered municipal advisory firms to register separately, the final rule requires these firms to furnish information about these individuals. The final rule also allows the SEC to censure these individuals if necessary.

Defined Terms:

The rule defines the following terms:

Advice. A person is providing “advice” to a municipal entity or an “obligated person” based on “all of the relevant facts and circumstances,” including whether the advice:

Involves a “recommendation” to a municipal entity.
Is particularized to the specific needs of a municipal entity.
Relates to municipal financial products or the issuance of municipal securities.

Advice, however, does not include giving out certain general information.

An “obligated person” essentially means an entity such as a non-profit university or non-profit hospital that borrows the proceeds from a municipal securities offering and is obligated by contract or other arrangement to repay all or some portion of the amount borrowed.

Investment Strategies. A person providing advice to a municipal entity or an “obligated person” with respect to “investment strategies” only has to register if such advice relates to:

The investment of proceeds of municipal securities.
The investment of municipal escrow funds.
Municipal derivatives.

Exemptions From the Municipal Advisor Definition:

To avoid confusion, the final rule clarifies exemptions from the municipal advisor definition for certain people engaging in specified activities.

The following people conducting the specified activities would not be required to register as a municipal advisor:

Public Officials and Employees. Public officials do not have to register to the extent that they are acting within the scope of their official capacity. This exemption addresses an unintended consequence of the original proposal that generated significant public comment and created the impression that public officials and municipal employees would be covered if they provide “internal” advice.

This exemption covers people serving as members of a governing body, an advisory board, a committee, or acting in a similar official capacity as an official of a municipal entity or an “obligated person.”

For instance, it covers:

• Members of a city council, whether elected or appointed, who act in their official capacity.

• Members of a board of trustees of a public or private non-profit university acting in their official capacity, where the university is an obligated person by virtue of borrowing proceeds of municipal bonds issued by a state governmental educational authority.

Similarly, this exemption covers employees of a municipal entity or an obligated person to the extent that they act within the scope of their employment.

Underwriters. Brokers, dealers, and municipal securities dealers serving as underwriters do not have to register if their advisory activities involve the structure, timing, and terms of a particular issue of municipal securities.

This exemption begins when the municipal issuer engages the underwriter on a particular transaction and would continue until the end of the underwriting period for that transaction.

The exemption does not apply to advice on investments of proceeds of municipal securities (or related municipal escrow investments in refinancings) or municipal derivatives. That is because this type of advice is outside the scope of underwriting the issuance of municipal securities and involves potential conflicts of interest.

Registered Investment Advisers. Registered investment advisers and associated persons do not have to register if they provide investment advice regarding the investment of the proceeds of municipal securities or municipal escrow investments. This exemption helps ensure the rule does not create duplicative regulation of investment advisers.

This exemption does not apply to advice on the structure, timing, and terms of issues of municipal securities or municipal derivatives. That is because advice in these areas is outside the focus of investment adviser regulation.

Registered Commodity Trading Advisor. Registered commodity trading advisors under CFTC rules and their associated persons do not have to register if the advice they provide relates to swaps. This exemption helps ensure the rule does not create duplicative regulation with existing CFTC regulation of swap advisers.

Attorneys. Attorneys do not have to register if they are providing legal advice or traditional legal services with respect to the issuance of municipal securities or municipal financial products.

This exemption does not apply to advice that is primarily financial in nature or to an attorney representing himself or herself as a “financial advisor” or “financial expert” on municipal advisory activities.

Engineers. Engineers do not have to register if they provide engineering advice such as feasibility studies and cash flow analysis and similar activities related to engineering aspects of a project.

This exemption does not apply to activities in which an engineer provides advice regarding municipal financial products or the issuance of municipal securities.

Banks. Banks do not have to register to the extent they provide advice on certain identified banking products and services (such as deposit accounts, extensions of credit, or bond indenture trustee services).

This tailored exemption does not apply to banks that:

• Engage in other municipal advisory activities such as providing advice on municipal derivatives or the issuance of municipal securities.

• Provide advice on municipal derivatives, in part because municipal derivatives were a source of significant losses by municipalities in the financial crisis.

Accountants. Accountants do not have to register if they are providing accounting services that include audit or other attest services, preparation of financial statements, or issuance of letters for underwriters.

Independent Registered Municipal Advisor. People who provide advice in circumstances in which a municipal entity has an independent registered municipal advisor with respect to the same aspects of a municipal financial product or issuance of municipal securities do not have to register, provided that certain requirements are met and certain disclosures are made.

Swap Dealers. Registered swap dealers under CFTC rules do not have to register as municipal advisors if they provide advice with respect to swaps in circumstances in which a municipal entity is represented by an independent advisor. This exemption helps ensure that the rule does not create duplicative regulation with existing CFTC regulation of swap dealers and recognizes a similar exemption under CFTC rules.

This exemption does not apply to swap dealers that engage in other municipal advisory activities such as providing advice on the issuance of municipal securities or the investment of the proceeds of municipal securities or municipal escrow investments.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If the reader has any questions concerning the contents of this post, you should contact a qualified professional.

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