Licensed And Unlicensed Investment Advisor — South Florida Elder, Senior And Retirement Financial Abuse FINRA Arbitration And Litigation Attorney
While elder fraud, breach of fiduciary duty and other types of financial abuse can take on many forms, there are a number of things which increasingly have been used in illegitimate schemes to defraud older investors. Elder or retired investors should exercise appropriate scrutiny before dealing with these individuals or entities or investing in these types of products.
Investment advisor services: A licensed investment advisor is a person or company responsible for making investments on behalf of, and/or providing advice to, investors. An investment advisor has a duty to serve the best interests of their investing client. At times, however, an investment advisor will take advantage of their position of trust to use unauthorized and deceptive methods to essentially steal money directly from their clients. Investor should be careful to review their monthly account statements and to conduct an annual review of their investment plan with their investment advisor. Investors should remain objective in their relationship with their investment advisor and remain alert for abnormal changes in their monthly account statements. For example, the SEC found an investment advisor that misappropriated at least $5.4 million from the accounts of four profit-sharing plans that were advisory clients of her employer. As part of that scheme, the investment advisor placed unauthorized orders to sell securities in these accounts and forged documents that transferred the proceeds from those sales to the accounts of two elderly women who were also advisory clients. The advisor then forged the signatures of these women on checks made that she made payable to herself, her creditors, and her relatives. [See SEC v. Susana P. Longo, Case No. 1:05-CV-0164 (N.D. Ga.)]
In addition to licensed investment advisors, fraudsters will hold themselves out as licensed investment advisors when, in reality, they are not. Before dealing with any person or company holding themselves out as a licensed investment advisor, you should verify the same.
Specifically, people or firms that get paid to give advice about investing in securities generally must register with either the SEC or the state securities agency where they have their principal place of business. As discussed in greater detail below, the rules governing the registration of certain investment advisers have changed.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd- Frank Act”) was signed into law. The Dodd-Frank Act amends certain provisions of the Investment Advisers Act of 1940 by delegating generally to the states responsibility over certain mid-sized investment advisers i.e., those that have between $25 million and $100 million of assets under management (“AUM”).
The Dodd-Frank Act and SEC rules increased the threshold above which all investment advisers must register with the SEC from $30 million to $110 million of AUM. Prior to July 2011, an investment adviser regulated by the state in which it maintained its principal office and place of business generally was prohibited from registering with the SEC unless the adviser had at least $25 million of AUM and was required to register with the SEC once it had at least $30 million of AUM. Now, investment advisers with less than $110 million of AUM may be prohibited from registering with the SEC, depending on the size of the adviser’s AUM and whether the adviser meets other requirements.
This means that state securities authorities will have primary regulatory authority over a substantial number of investment advisers that previously were subject to primary regulation by the SEC. Larger investment advisers, generally, those with over $100 million of AUM, will continue to be registered with the SEC and will be subject to federal regulation (state investment adviser laws requiring registration, licensing, and qualification have been preempted for these advisers).
Some investment advisers employ investment adviser representatives, the people who actually work with clients. In most cases, these people must be licensed or registered with your state securities regulator to do business with you. So be sure to check them out with your state securities regulator.
To find out about an investment adviser and whether it is properly registered, read its registration form, called “Form ADV.” Form ADV has two parts. Part 1 contains information about the adviser’s business and whether the adviser has had problems with regulators or clients. Part 2 sets out the minimum requirements for a written disclosure statement, commonly referred to as the “brochure,” which advisers must provide to prospective clients initially and to existing clients annually. The brochure describes, in a narrative format, the adviser’s business practices, fees, conflicts of interest, and disciplinary information. Before you hire an investment adviser, always ask for and carefully read both parts of the Form ADV.
Where applicable, each brochure provided to clients must be accompanied by a “brochure supplement” that includes information about the specific individuals, acting on behalf of the adviser, who actually provide investment advice and interact with the client. An adviser must deliver the brochure supplement to the client before or at the time that the specific individual begins to provide investment advice to the client.
You can view an adviser’s most recent Form ADV online by visiting the Investment Adviser Public Disclosure (IAPD) website. You can also obtain copies of Form ADV for individual advisers and firms from the investment adviser, your state securities regulator, or the SEC, depending on the size of the adviser. You’ll find contact information for your state securities regulator on the website of the North American Securities Administrators Association.
If the investment adviser is registered with the SEC, you can get a copy of Form ADV (Part 1 only) by accessing information on “How to Request Public Documents” at http://www.sec.gov/answers/publicdocs.htm. In addition, at the SEC’s headquarters, you can visit the SEC’s Public Reference Room from 10:00 a.m. to 3:00 p.m. to obtain copies of SEC records and documents.
Because some investment advisers and their representatives are also brokers, you may want to check both BrokerCheck and Form ADV.
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder financial abuse 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.