Articles Posted in Firm News

When your stockbroker takes your money to invest on your behalf, he or she must follow certain rules and regulations. Investments have regular ups and downs as the market fluctuates. Therefore, you may have to look very closely at your portfolio’s performance, along with charges and fees, to determine that your stockbroker has done anything wrong. The bottom line is that your broker owes you a fiduciary duty.

What is a fiduciary duty?

You may have heard the term fiduciary duty used in many different contexts. Many people who act in a role where other people entrust them with their assets or funds must abide by a fiduciary duty. Examples include trustees of a trust, the personal representative of a probated estate and officers of a corporation. All of these people owe a duty of loyalty and care to the people or entities they represent. They are supposed to act in a reasonable manner on behalf of the entity, treating the assets the way the owner would treat them.

Insider trading happens when a person makes a trade based on information that is not available to the public. Trading can be based on an event that is likely to either increase or decrease the price of a company’s stock. For example, a better than expected quarterly performance would likely make stock options more valuable. Trading on this type of information before it’s made public provides investors and brokers with an unfair advantage. That’s why it’s important to take steps to level the playing field.

The rewards are small for a big risk

People who engage in insider trading often suffer from a type of tunnel vision. When a broker makes trades in the hundreds of millions of dollars per year, an insider trade involving a few thousand dollars doesn’t seem like a big deal. Years ago, lifestyle guru Martha Stewart was convicted of insider trading. The illegal trading amounted to $45,000. Peanuts for someone with a net worth in the millions. Nonetheless, she still had to pay significant fines and serve a prison term.

Your broker earns a commission or collects a fee every time they trade a stock. This can tempt some unethical brokers to engage in “churning.” Churning happens when a broker makes several small trades to help them earn extra income from commissions and fees. Churning is solely for the benefit of the broker. It does nothing to help your investments. It can even lead to you losing your hard-earned money.

That said, it’s the job of your broker to make trades. Depending on the type of investments you have, making a high-volume of trades may even be advantageous. However, you should still take note of signs of churning. Recognizing the warning signs can let you know whether you’re being taken advantage of or whether your broker is operating above board.

Times when you should be skeptical

On September 19 2019, William C. Conway, Jr., originally of Fort Lauderdale, Florida, and Steven Schrag, originally of Bartlesville, Oklahoma, had a final judgment entered against them, jointly and severally, in the total amount of $771,350 for fraud and deceit in the case styled Michael Conville, Joseph Gilmore and Beacon Construction Group, Inc. v. William C. Conway, Jr. , Steve Schrag et al, Case No. 12-33381, filed in the Circuit Court of Broward County, Florida.

The final judgment was based upon a unanimous jury verdict which found Willian C. Conway, Jr. and Steven Schrag, among other defendants, guilty of fraud in the inducement, negligent misrepresentation in the inducement and conspiracy to defraud.  The judgment was predicated upon an alleged gold (precious metals scam) which originated in Africa.

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Understanding Margin –

Margin is borrowing money from your broker to buy a security and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more securities without fully paying for it.  The amount owed to the broker is called the debit balance.  Through the use of leverage, investors attempt to magnify gains on actual cash or collateral deposited into their accounts.  But at the same time, the use oft margin exposes investors to the potential for higher losses.  Another reason for borrowing money from brokers is the feature involving a no-repayment-date loan.  This feature is generally not available through other types of lending institutions, including banks.  The no-repayment feature, although very attractive, can be fraught with danger.  The investor should be made aware that if the value of securities on deposit with the broker declines substantially, the broker will require additional funds or collateral to protect the loan.

There are 2 primary types of margin requirements: initial and maintenance.

To answer the above question, the reader should first review Florida Statute 48.193, which is titled “Acts subjecting persons to jurisdiction of the Courts of this state.”  The elements required for pleading a civil conspiracy in Florida are (1) a conspiracy between two or more parties, (2) to do an unlawful act or to do a lawful act by unlawful means, (3) the doing of some overt act in furtherance of the conspiracy, and (4) damage to the plaintiff as a result of the acts, performed in furtherance of the conspiracy. Under Florida law, civil conspiracy is a derivative of the underlying claims which form the basis of the conspiracy. The gist of a civil conspiracy is not the conspiracy itself but the civil wrong which is done through the conspiracy which results in injury to the Plaintiff. There is no independent action for civil conspiracy. Thus, generally an actionable conspiracy requires an actionable underlying tort or wrong. An act which does not constitute a basis for a cause of action against one person cannot be made the basis for a civil action for conspiracy. However, there is an exception to the rule where the plaintiff can show some peculiar power of coercion posses by the conspirators by virtue of their combination, which power an individual would not possess.

For purposes of this discussion, we will assume that the elements set forth above to allege a civil conspiracy exist.  A series of Florida cases have found personal jurisdiction over non-resident defendants engaged in conspiracies that include tortious or statutorily-prohibited actions as against Florida residents.  For example, telephonic, electronic or written communications into Florida, by a non-resident, may form the basis for personal jurisdiction if the alleged cause of action arises from the communications.  In addressing allegations that a non-resident defendant committed a tort in Florida though acts and communications directed into the state from outside of Florida, the appropriate inquiry is whether the tort as alleged occurred in Florida and not whether the alleged tort actually occurred.

As can be seen from the above discussion, it is important to examine all of the facts underlying the cause of action alleged as to each defendant.  When dealing with a non-resident defendant, it is especially important to allege, in the complaint, all of the specific acts, of the non-resident defendant, that were committed in furtherance of the conspiracy so that the court may properly determine the issue of jurisdiction.

If You Are A Florida Resident And You Want To Bring A Claim Against A Non-Resident, What Acts Would Subject The Non-Resident To The Jurisdiction Of The Florida Court System? South and Central Florida Commercial Litigation Attorney.

In certain circumstances, the answer to this question is easy to discern.  One need look no further than the provisions of Florida Statute § 48.193.  It is for that reason that we have set forth the provisions of the statue in its current entirety below.  The provisions of the statute are clear.  If a non-resident does certain enumerated things in Florida, Florida courts have jurisdiction to hear your claim.  However, many times, because of the unique facts of your case, it might not be that easy to determine whether Florida is the correct jurisdiction. As a result of this many non-resident defendants contest the issue of jurisdiction, the cases that deal with the provisions and legal interpretations of the statute are voluminous.  Thus, if you want to make a claim against a non-resident, the specific facts of your case should be analyzed by a qualified professional so that the pros and cons of making a claim in Florida can be discussed with you so that you can make a informed decision as to where you might want to bring your action.

48.193 Acts subjecting person to jurisdiction of courts of state.—

The Florida Uniform Fraudulent Transfer Act – How Can the Act Help You in Collecting on Your Judgment – South and Central Florida Judgment (Including Out-of-State Judgments) Collection Attorney.

The Florida Uniform Fraudulent Transfer Act (“FUFTA”) is contained in Florida Statute §§ 726.101 – 201  FUFTA  provides creditors (judgment holders) with various forms of relief to avoid a debtor’s (defendant’s) fraudulent transfer of assets or funds.  A creditor (a plaintiff) may avoid a debtor’s transfer where the creditor shows that the transfer was made with actual intent to hinder, delay, or defraud.  To that end, FUFTA provides a non-exhaustive litany of factors – referred to as “badges of fraud” – to consider when determining whether a debtor’s transfer is fraudulent as to the creditor:

  1.   The transfer or obligation was to an insider.

Can a Florida Court Obtain Jurisdiction Over a Non-Florida Limited Liability Company to Enforce a Charging Lien Against a Florida Resident’s Membership Interest? South Florida Commercial Litigation and Collection Attorney?

If you are reading this article, you are likely a judgment creditor attempting to recover, on your judgment, against an individual or entity that is resident in Florida or that has moved to Florida in order to attempt to avoid paying you..  The Florida LLC Act provides a mechanism to have the court enter a charging order against the judgment debtor’s membership interest in a limited liability company or, under limited circumstances, to order that the member’s interest be foreclosed to satisfy the judgment.  One argument that is generally raised by the judgment debtor, concerning non-Florida limited liability companies, is that a Florida court may only exercise jurisdiction over property of a judgment debtor located within the court’s jurisdictional territory.  As a result, the judgment debtor argues that because a foreign limited liability is located outside the State of Florida, Florida courts do not have jurisdiction to enforce the judgment against those entities.  However, a membership interest in a limited liability company, including foreign limited liability companies, is intangible personal property which accompanies the person of the owner.  Therefore, because the member’s interest resides with the Judgment debtor in Florida, the membership interests are located in Florida and are properly subject to in rem jurisdiction in the State of Florida.

Please keep in mind that this article is for informational purposes only.  It is not designed to be complete in all material respects.  Moreover, there may be facts specific to your situation that would have to be considered to determine whether or not Florida courts would have jurisdiction to enforce your judgment against a foreign limited liability company.  Thus, if you have any questions relative to this post, please feel free to contact us.

True investment advisers have fiduciary obligations that they owe to their clients.  As such, they have an obligation to make full and fair disclosure to clients and prospective clients concerning their material conflicts of interest, including conflicts arising from financial incentives, and to act consistently with those disclosures. This principle is reflected in Form ADV, which reminds advisers of their general obligation to fully disclose material facts relating to their advisory business and specifically requires disclosure concerning the compensation and fees that advisers and their supervised persons receive, including from asset-based charges and service fees.

The chance of a conflict of interest arising increases based upon the number of rolls that a professional assumes in dealing with a client. This is especially true for attorneys. Some attorneys attempt to provide estate and tax planning advice to clients and then offer investments to those clients through broker/dealer or investment advisory firms with which they are associated.  When does the attorney’s legal advice end and his investment activities commence?  This is a question that is difficult to answer. Every factual situation will be different.  If you have any questions concerning an investment that you have made based upon the recommendation of your attorney/advisor, please feel free to contact us.

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