Stock brokers and financial consultants who engage in lying, cheating, and stealing can score immense profits in the short term.  Hefty sums can be pocketed relatively quickly by shifty financial advisers who promise the world, and then shamelessly deliver toxic financial sludge.  But, sooner or later, the hammer will come down on dishonest, fly-by-night financial scam artists.  Although it may be time consuming to build cases against securities industry professionals who wreak havoc on trusting investors, action will eventually be taken.  Slippery salespeople will ultimately be held accountable.  Significantly, however, the legal remedies that impose liability on brokers are accompanied by a host of legal principles which operate so as to hold brokerage firms responsible.  Some of these legal standards are not unique to the securities industry.  They rest purely on common law standards that have been with us for over a century, such as respondeat superior, vicarious liability, fraud, breach of contract, and agency law.  Other legal standards under which brokerage firms may be held liable stem from federal and state securities statutes — to include statutes targeting deception and deceit, false statements, and representations that are incomplete (material omissions).  Still more securities statutes that may serve as a basis for a finding of broker-dealer liability exist in the form of “aiding and abetting” provisions, as well as “control person” liability standards.  Extending the analysis further, it must be noted that an assortment of pivotal factual and legal considerations will invariably arise in connection with an examination of the extent to which a brokerage firm actually complied with its own written supervisory procedures.  These procedures, the specifics of which are peculiar to the securities industry, compel brokerage firms to act in conformity with sweeping, intricate supervisory mandates, the violation of which will almost certainly be factored into the equation while dealing with questions of liability — regardless of whether such liability stems from intentional, reckless, and/or negligent conduct.  The discussion featured herein is intended to illuminate — and “bring to life” — the crucial nature of pertinent supervisory principles that will often be taken into account from a damages perspective.

While it may come as a surprise to most investors, the financial advisers with whom they deal operate within an environment that necessarily imposes immense supervisory responsibilities on brokerage firms.  For decades, securities industry regulators have gone to great lengths to not only emphasize the essential role of supervision, but expand upon the key components of a properly functioning supervisory system, the likes of which is in harmony with the full range of supervisory responsibilities broker-dealers must shoulder.  Set forth below, in “bite sized” nuggets, are a host of pronouncements that have been made on this front by the SEC and FINRA (f/k/a NASD):

  • The ongoing responsibility of brokerage firms to supervise stock brokers and other employees by adhering to the written supervisory procedures they maintain represents a crucial component of the overall regulatory structure that is designed to provide for investor protection.
  • It is virtually inconceivable that a satisfactory level of investor protection can truly be achieved unless brokerage firms establish, maintain, and enforce their written supervisory procedures. Effective supervision by broker-dealers represents a cornerstone of the multi-layered system that has been steadily built upon, and refined, for purposes of achieving a more robust level of investor protection.  In many respects, effective supervision serves as a first line of defense for investors.
  • Effective supervision starts at the top. A brokerage firm’s obligation to effectively discharge its supervisory responsibilities rests upon the highest-ranking members of management.
  • Upon learning of serious rule violations or improprieties occurring within a brokerage firm, the CEO of that firm must ensure that steps are taken to prevent further violations of the securities laws. Under such circumstances, the CEO is likewise required to determine the nature and character of the wrongdoing that has taken place.
  • Recognizing that supervision and compliance do not represent a profit center on a corporate income statement, it may be the natural inclination of brokerage firms to “starve” those areas, while simultaneously placing overwhelming workloads on “front line” personnel. Such tactics are prohibited.  Brokerage firms are required to provide a sufficient level of financial resources and staffing, along with a dependable system of “follow up and review,” so as to ensure that branch managers, compliance officers, and the like are actually carrying out their responsibilities.
  • Supervisory procedures that fail to assign specific responsibilities to particular individuals are inherently deficient; they do not pass muster. Likewise, written supervisory procedures must clearly enumerate the specific lines of business and the applicable regulatory provisions each supervisor is charged with overseeing.  These requirements are driven by logic and common sense.  They enable firm personnel, along with securities industry regulators, to easily determine the identity of each individual who is responsible for supervising a particular area, together with the period of time during which he held that responsibility.
  • “Red flags,” which essentially amount to indications of improprieties and/or irregularities, require a prompt, vigorous response. When red flags come to the attention of corporate executives, they must react in a quick, aggressive manner.  Upon doing so, they cannot simply “wash their hands” of the problem.  It is incumbent on them to engage in a process of “follow up and review” — so as to “stay on top” of the situation. 
  • The supervisory system of a brokerage firm must be structured so as to not only detect securities law violations, but also prevent securities law violations from taking place. If a brokerage firm attempts to sidestep responsibility by claiming that its supervisory system never even detected any violation of any securities laws, it will hardly encounter success.  Such “failure to detect” arguments are completely devoid of merit.  If it were otherwise, Congress’ investor protection objectives would be undermined.  Succinctly put, recognition of such a defense argument would effectively encourage brokerage firms to establish and maintain primitive, rudimentary supervisory systems that would customarily yield no meaningful information — and then hide behind the assertion that the informational void they intentionally created shields them from liability.

 Investors fall victim to securities fraud on a regular basis.  To be sure, the majority of stock brokers strive to conform to the rules governing their conduct, to include the mandates featured within the written supervisory procedures to which they must adhere.  But, with more than 600,000 individuals working as registered stock brokers — and many brokerage firms being lax in their supervision — an ongoing stream of investor complaints grounded on fraud constitutes a virtual certainty.  In any event, the cold realities of the financial markets are, in all likelihood, significantly worse than the statistics indicate; case filings do not properly gauge the frequency with which registered financial advisors deceive customers while failing to adhere to their responsibilities.  What is the rationale for this observation?  Let’s take a look.  First, investors who have been tricked and deceived often feel a sense of shame — which makes them reluctant to assert their rights.  Second, while the amount of money that is lost in connection with a given securities transaction may be large relative to the savings that have been accumulated by the investor in question, the underlying sum will often be insufficient to warrant the involvement of an investment fraud attorney.  (Note: On occasion, this problem may be addressed through the filing of a “group claim,” wherein allegations are asserted on behalf of various investors in a single pleading.)  Third, while investors will invariably be cognizant of the sum that has been lost, there is no reason to believsecurities litigation attorneye that they will learn of the extent to which the broker’s statements missed the mark, whether by design or neglect.  Fourth, issues going to annual income, net worth, gains and losses that have previously been experienced, etc. will ordinarily be viewed in a highly sensitive light.  Once investors learn that documents and information pertaining to these subjects will be turned over to defense counsel so as to facilitate cross-examination, heightened levels of stress and anxiety may arise.  When layered on top of the anxieties that generally accompany litigation, some investors will inevitably get “cold feet.”

Emotional pain and agony serve as natural consequences of brazen financial fraud schemes that are structured so as to mislead people through the use of blatant falsities.  Nonetheless, investors should not give up hope.  State and federal securities law principles can serve as grounds for recovery.  To that end, investors should consider the merits of retaining a securities lawyer who maintains a deep understanding of the investor protection provisions embedded in state and federal law.  If you suspect that you have sustained losses on account of the dishonest conduct of an unscrupulous stock broker, reach out to a top-ranked investment fraud attorney so as to obtain a better understanding of the potential recovery options that are available.  Depending on the circumstances, it may ultimately become clear that the brokerage firm violated the spirit and the text of its own supervisory procedures.  Extending the analysis further, it may also become apparent that customers of the firm would not have been defrauded if the firm had complied with its procedures.

Chris Bebel, a leading securities litigation attorney with Tefteller Law, PLLC, has represented scores of securities fraud victims over the course of his 30-year career.  Along the way, Mr. Bebel has developed a proven record of success, to the extent that numerous law firms across the country have retained him for his securities fraud expertise.  Over the course of his highly-successful career, Mr. Bebel has served in a number of roles, including SEC attorney, trial lawyer, trial advocacy instructor, published author, federal prosecutor, appellate lawyer, and securities law lecturer.  Additionally, it must be recognized that Chris Bebel’s acumen and understanding of the securities industry extend well beyond the text of the regulations and statutes.  Simply put, he understands how stock brokers operate in “real life.”  Consequently, he is keenly aware of the tactics the “bad eggs” of the group employ when they prey upon unsuspecting investors.  Time and time again, he has been able to capitalize on this advantage by “getting inside the mind” of his adversary, to the benefit of his clients.  Plus, Mr. Bebel has frequently supplemented that initiative by emphasizing the controlling character of pertinent supervisory provisions — together with the facts establishing a violation thereof.

Taking all pertinent considerations into account, Mr. Bebel’s extensive knowledge of securities industry compliance and supervisory standards has regularly provided him with a structural advantage; further, his comprehension of those topics has generally exceeded the broker’s appreciation of those principles.  Having served as a financial fraud prosecutor, a securities industry regulator, a plaintiffs’ lawyer, and a defense attorney in a litany of cases, Mr. Bebel has repeatedly leveraged his substantial experience in order to build a stronger case, and thereby advance the interests of the investment fraud victims he has represented.  By way of example, Mr. Bebel has previously called upon these attributes, to the benefit of his clients, by delivering devastating cross-examinations of financial advisors, as well as expert witnesses who have been hired by defense counsel.

Chris Bebel graduated from Georgetown Law School, where he earned an LL.M. in Securities Regulation.  While attending Georgetown, he also served as a tutor of first and second year law school students.  An educator in his own right, Mr. Bebel has written several scholarly articles on securities law, which have been published in various academic law journals.  Mr. Bebel has also delivered an array of presentations dealing with a host of securities litigation topics at continuing legal education venues throughout the nation.  Mr. Bebel works in concert with Bradley Ellison, a retired U.S. Air Force master sergeant.  Mr. Ellison is a conscientious, intellectual paralegal who has earned six degrees, including three graduate degrees.  A gifted writer, Mr. Ellison frequently makes substantial time commitments toward the editing and enhancement of pleadings, motions, responses, and discovery requests.  By combining his conscientious qualities with his editorial and cerebral talents, Mr. Ellison has repeatedly provided for the preparation of more compelling legal documents — and thereby furthered the interests of the firm’s clients.  In recent years, Mr. Ellison has played an instrumental role in cases dealing with private offering fraud, which is sometimes referred to as private placement fraud.

It is important to understand that neither Chris Bebel nor Bradley Ellison can offer any express or implied guaranty or promise of success.  Basic ethical standards do not allow for such reckless and irresponsible conduct.  Likewise, it must be recognized that Mr. Bebel has traditionally declined a substantial percentage of the cases investors have presented.  That being said, investors may rest assured that a decision to accept or reject a given case will necessarily be fact intensive; it will turn on a detailed analysis of the particulars.  As a courtesy to prospective clients, Mr. Bebel charges no fee for initial consultations.

If you sustained a substantial financial loss based upon the questionable “advice” of a stock broker, it may be to your advantage to confer with a securities litigation lawyer to ascertain whether rights and remedies may exist under state or federal law — the substance of which are designed to provide for investor protection.  Significantly, however, investors who endeavor to arrange for a conference with an investment fraud lawyer must proceed carefully and thoughtfully.  Vast differences exist among securities lawyers.  Investors who retain the services of an untested novice attorney may trigger yet another round of grief and frustration.  To state the obvious, it will usually be more productive and beneficial to hire a knowledgeable, experienced, skillful securities fraud lawyer, such as Mr. Bebel, who possesses a detailed understanding of the securities industry.  On a pragmatic level, Mr. Bebel’s knowledge, understanding, and expertise can scarcely be questioned — as demonstrated by the numerous occasions on which securities lawyers situated across the country have retained him as an expert.  And, not surprisingly, the challenges that have arisen in connection with the cases where he has been asked to serve as a securities fraud expert have further magnified the depth of his knowledge.  In sum, Mr. Bebel’s litigation and trial experience, coupled with his repeated retention as a securities fraud expert, render him uniquely qualified to serve as an advocate for investors who have suffered financial losses as a result of stock broker fraud and investment adviser fraud.  Although Mr. Bebel is based in Texas, it is important to understand that his representation is not limited to Texas investors.  Over the years, he has established a record of success while representing investors residing throughout the country.

If you suspect that you may have been subjected to financial adviser fraud, don’t settle for an inexperienced securities law attorney.  Instead, call Chris Bebel, a leading investment fraud lawyer, and explain the circumstances of your particular situation.  Put his experience, skill, and expertise to work for you.  Even if he does not accept your case, he may be able to offer you valuable securities fraud insights.

Above all, it is essential that you not stand idle.  Depending on the circumstances, there may be a need to act quickly.  For instance, statutes of limitations and other time constraints may bar a recovery if a lawsuit is not promptly filed.  To speak with Chris Bebel, call Tefteller Law, PLLC, a respected securities law firm, today.