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- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
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- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
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- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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NEWSLETTERS & ALERTS
Easy Marks on Wall Street
by Howard Haykin
Imagine you're an 85-year old widow with a brokerage account at Concorde Investment Services. You seek “growth and income” with “moderate risk” for your portfolio, your annual income is $70,000, and you have total net worth of between $300,000 and $1,000,000.
Given your advanced age and limited investing experience, your broker pegged you as an EASY MARK for a speculative and highly risky private placement that was suitable only for "accredited investors who can bear the economic risks of their investment for an indefinite period of time and who can sustain a total loss of their investment.” But to qualify you as an “accredited investor,” your broker had to lie on the private placement application by inflating your net worth to $1,003,700
Luckily for the broker, his supervisor was also an EASY MARK. And, as quickly as one can say "Richard Cody," the supervisor approved the transaction without … (i) matching the hyped-up net worth figure to account records; (ii) ascertaining the suitability of this speculative investment for this customer; and, (iii) realizing that you, the customer, never authorized the transaction.
ARE YOU AN ‘EASY MARK’? Most investors don't qualify as 'accredited investors' and speculative private placements are not suitable for their portfolios. However, if you somehow were 'railroaded' into such an investment and ended up losing money, it probably wouldn't comfort you to know that your broker was subsequently barred from the industry, and that his supervisor was out of work for quite a while. Yet, you'd be pleased to know there's a silver lining to your story: Should you ever seek to recover your money lost, you likely have a very strong case against the broker, his supervisor and the broker-dealer.
Of course, avoiding such bad investments in the first place is always best. But for that to happen, inexperienced investors may need to employ the services of a trusted, independent Financial Watchdog, who would provide an extra set of eyes and ears. The rewards, however, often outweigh the costs.
[For further details, click on … FINRA Case #2018060577601.]