Proficient in securities litigation cases & FINRA arbitrations with experience of representing investors, securities firms and professionals.
Michael J. Betts LLC represents clients in securities litigation matters and FINRA arbitration proceedings, i.e., securities/investment-related arbitrations administered by the Financial Industry Regulatory Authority, Inc. (FINRA). Mr. Betts has extensive experience with such matters, representing both investors and securities firms and professionals, and has handled a wide range of securities litigation matters and FINRA arbitrations – both “Customer Claims” and “Industry Claims.”
FINRA Customer Claims
“Customer claims” are FINRA arbitration proceedings that are brought by customers of securities firms alleging that they suffered financial losses through the mishandling of their accounts or other misconduct. These claims are governed by FINRA’s Code of Arbitration Procedure for Customer Disputes, Rules 12100 through 12905.
Customer claims can be based on many different forms of alleged misconduct. Some examples of the more common types of customer claims are those based on fraudulent misrepresentations and nondisclosures, portfolio mismanagement (e.g., lack of diversification), excessive trading (“churning”), claims based on annuities and other insurance products, breach of fiduciary duties, overconcentration, unsuitability and failure to supervise.
Under Rule 12401 of the Code, unless the parties otherwise agree, the arbitration panel for a customer claim in the amount of $100,000 or less consists of a single arbitrator. In other cases, i.e., claims in excess of $100,000, the panel consists of three arbitrators unless the parties agree to the appointment of a single arbitrator. Rules 12400 through 12414 of the Customer Code govern the qualification and selection of arbitrators.
FINRA Industry Claims
In addition to handling FINRA customer claims, Mr. Betts also devotes a portion of his securities litigation practice to the representation of brokers in “industry arbitrations” involving employment disputes and other intra-industry disputes arising between FINRA member firms or between firms and brokers (“associated persons”). Mr. Betts also represents brokers in connection with FINRA and Securities and Exchange Commission (SEC) investigations and enforcement proceedings.
FINRA industry arbitrations involve disputes between brokers and the firms with whom they are or were employed. The cases frequently relate to issues that arise as a result of the termination of the employment relationship, and many of the cases are brought by the firms, who are seeking repayment of amounts allegedly due under employee forgivable loans (“EFLs”) and promissory notes made by the broker at the inception of the employment relationship or thereafter. Mr. Betts also represents brokers with respect to non-compete and trade secret issues that arise when brokers have moved, or are contemplating a move, from one firm to another.
Many different types of industry claims are subject to FINRA arbitration. In general, a claim will be regarded as subject to FINRA arbitration if the dispute arises out of the business activities of a member firm or an associated person and is between or among (i) member firms, (ii) member firms and associated persons, or (iii) associated persons. FINRA arbitrations involving industry claims are governed by FINRA’s Code of Arbitration Procedure for Industry Disputes, Rules 13100 through 13905.
Employment-related industry claims frequently relate to issues that arise as a result of the termination of the employment relationship, and many of the cases are “up front bonus” claims brought by firms seeking repayment of amounts allegedly due under employee forgivable loans (“EFLs”) and promissory notes made by the broker at the inception of the employment relationship or thereafter. Mr. Betts also represents brokers with respect to non-compete and trade secret issues that arise when brokers have moved, or are contemplating a move, from one firm to another. Other common types of industry claims include raiding cases, defamation claims, and claims involving statutory discrimination and whistleblowing.
FINRA/SEC Investigations and Enforcement Proceedings
Mr. Betts also represents brokers in connections with FINRA enforcement proceedings, including investigations, examinations and disciplinary actions. These representations have included representing brokers in responding to FINRA requests for documents and on-the-record interviews (“OTRs”) during which brokers are required to appear under FINRA Rule 8210 and testify under oath concerning the matters that are the subject of the investigation. Some of the common subjects of FINRA enforcement proceedings include allegations relating to:
- Forms U4/U5 – Late Filing, Failure to File, Filing of False, Misleading or Inaccurate Forms or Amendments (Article V of FINRA By-Laws and FINRA Rule 2010);
- Suitability / Unsuitable Recommendations (FINRA Rule 2010 and NASD Rule 2310);
- Churning or Excessive Trading (FINRA Rule 2010 and IM-2310-2);
- Unauthorized Transactions (FINRA Rule 2010 and NASD IM-2310-2);
- Failure to Supervise (FINRA Rule 2010; NASD Rule 3010);
- Communications with the Public (FINRA Rules 2010 and 2220; NASD Rules 2210 and 2211(d));
- Discretion (FINRA Rule 2010; NASD Rule 2510);
- Misrepresentations or Material Omissions (FINRA Rules 2010 and 2020);
- Pricing (FINRA Rule 2010; NASD Rule 2440 and NASD IM-2440);
- Outside Business Activities (FINRA Rules 2010 and 3270);
- Selling Away / Private Securities Transactions (FINRA Rule 2010 and NASD Rule 3040);
- Unregistered Securities (FINRA Rule 2010 and Section 5 of Securities Act of 1933);
- Customer Confirmations (SEC Rule 10b-10 and NASD Rule 2230);
- Customer Protection Rule (FINRA Rule 2010 and SEC Rule 15c3-3);
- Record-keeping Violations (FINRA Rule 2010, NASD Rule 3110, and SEC Rules 17a-3 and 171-4);
- Regulation T and Margin Requirements (Regulation T and FINRA Rules 2010 and 4210);
- Conversion or Improper Use of Funds or Securities (FINRA Rules 2010 and 2150; NASD Rule 2330 and IM-2330)
- Forgery or Falsification of Records (FINRA Rule 2010);
- Registration Violations (FINRA Rules 2010 and 1122; NASD Rules 1000-1120);