Bill Introduced to Have FINRA Oversee Investment Advisors

Friday, April 27, 2012

On Wednesday, April 25, 2012, House Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala) and Rep. Carolyn McCarthy (D-N.Y.) introduced legislation that, if passed, could make FINRA the self-regulatory organization for financial advisers.  Investment Adviser Oversight Act of 2012. Presently, the SEC has oversight of financial advisers.  The bill would permit the creation of one or more self-regulatory organizations, known as National Investment Adviser Associations, which would report to the SEC. Advisers with retail clients would be required to belong to one of the associations and pay membership dues. 

For any number of reasons, the SEC has been unable to adequately examine the overwhelming majority of investment advisers. The statistics speak for themselves.  There are approximately 12,000 registered advisers in the U.S., the vast majority of whom never undergo regular examination by the SEC.  According to Rep. Bachus, the average SEC-registered investment adviser can expect to be examined less than once every 11 years” and “only 8 percent of investment advisers were examined by the SEC in 2011, compared to 58 percent of broker-dealers. “

Critics of the bill believe that building on the SEC’s existing infrastructure and experience is a better option than creating an added layer of regulation.  Proponents of the bill cite the need for regulation, particularly given that many consumers have little if any understanding of the different titles that investment professionals use.  Proponents of the bill believe oversight by FINRA would increase protection for investors by subjecting advisers to at least the same level of scrutiny as broker-dealers.

Whatever the outcome, it will be interesting to watch this unfold. According to industry officials, a vote is expected as early as May 2012.  Please contact John Cronan at 207.791.3000 for more information or with any questions.

Misrepresentation Case Against Bank Directors, Officers, and Accountant Comes to Federal Court in Maine

Wednesday, April 25, 2012

A case accusing former directors and officers of the Savings Bank of Maine Bancorp and its auditor alleging misrepresentation and professional malpractice in connection with an $18 million loan just landed on Maine shores.  The complaint alleges that the loan was written down by half to $9 million.

The case, Bankers' Bank Northeast v. Ayer, et al., Docket No. 1:12-cv-00127-GZS was pending for about 14 months in Connecticut federal court until that court granted a motion to dismiss for lack of personal jurisdiction as to one of the defendants and, instead of dismissing, transferred the case to federal court in Maine.  The case was formally entered on the docket of the Maine federal court on April 17, 2012.  The case has been assigned to Judge George Z. Singal. 

Last week, the Bangor Daily News published an article covering the transfer of the case and summarizing some of the allegations, which defendants have denied, "Federal Suit Against Former Maine Bank Officials, Accountant Moved to Bangor Court."

Preti attorneys Gregory P. Hansel and Sigmund D. Schutz have been selected as Maine counsel to defend a group of former Bank officers named in the lawsuit.

Welcome to the New England Securities Litigation & Arbitration Blog!

Tuesday, April 24, 2012

The goal of this new blog is to inform, educate, and engage on legal issues impacting the financial services industry with a particular focus on securities, financial industry, and fiduciary litigation and arbitration in Maine, Massachusetts, and New Hampshire.  

We are lawyers who handle securities industry and stockbroker disputes with customers, disputes with insurers and insurance agents over sales and other practices, disputes with registered investment advisors, directors and officers liability, trust and fiduciary disputes, and financial services litigation and arbitration.  We practice in state and federal trial court, state and federal appeals courts, and in arbitration.  We have arbitrated before the Financial Industry Regulatory Authority (FINRA), the American Arbitration Association (AAA), and other forums. 

We also have regulatory defense experience in connection with investigations and enforcement actions before agencies involved in securities and insurance regulation throughout the region. 

 Please comment, ask questions, and contact us.  Welcome!