Many of our broker dealer clients have problems with employees, financial advisers and independent contractors as it relates to customer complaints about how their accounts were handled. The complaints have ranged from account embezzlement, theft, document alteration, selling away, mismanagement, gross negligence, unsuitability, churning, elder abuse, forgery, failure to pay EFLs and many more situations too numerous to detail here.
What is worse, these customer complaints almost invariably trigger FINRA investigations, and often, investigations by the Texas Securities Board and the U.S. Securities & Exchange Commission (the “SEC”). The broker-dealer is subject to jurisdiction of all of these regulatory bodies and also may receive a grand jury subpoena. The situation can become overwhelming. Experienced legal assistance is vital to formulate a comprehensive plan of representation, to review what is being investigated, what has been subpoenaed and to determine the purpose and extent of the investigation.
Without this experience to focus the client on the comprehensive plan of defense, there can be a hidden cost. Even when companies are not identified as targets of grand jury investigations, unwary companies often discover too late that they have waived attorney-client and work-product privileges in prior document production and testimony, and have unnecessarily entangled their companies and executives in ongoing investigations.
While employees and others typically have indemnification agreements with the broker-dealer, this is cold comfort if, as is many times the case, these individuals have little by way of a “deep pocket” and their acts are intentional so that insurance coverage is compromised. It is The Spencer Law Firm’s experience in judging these situations and developing a joint defense agreement, if deemed necessary, to secure the cooperation of the primary witnesses and to get as much information as possible to understand the full complexities of the problem. Without all of this information, it is difficult to see what the regulators are focusing on since they do not have to furnish this information or secret witnesses to you during the investigation process.
We also assist broker dealer clients in handling routine employee issues, such as preparing and enforcing employee noncompetes, nondisclosure and other provisions of employment agreements that are being violated. Often we have to file for injunctive relief from former employees who are calling on their old book of clients in violation of their contract. Many times these former employees need to be reminded of the agreement to not disparage their former employer and that the employee forward loans (“EFLs”) need to be repaid. Even in the best of times, former employees can cause a lot of damage to client relationships and to the firm’s bottom line.
The Spencer Law Firm has represented the broker-dealer in representing it in regards to customer disputes, FINRA investigations, grand jury subpoenas involving current or former employees, employee failure to pay EFLs, losses in client accounts, forgeries, embezzlement, negligent handling of client accounts, churning, bank document alterations, IRS document fraud, mail fraud, wire fraud and the like. Many of our clients were innocent victims of employee fraud, this employee’s criminal actions or failure to comply with strict liability federal and state securities laws. This failure to abide by these strict liability laws can be disastrous to an employer who was ignorant of such, but who is in the “chain” of the accused behavior or law violation and is responsible for the actions or inactions of this rogue employee.
On the flip side of this equation, The Spencer Law Firm has represented the terminated or compromised (former) employee who has been the subject of a customer complaint, FINRA investigation, grand jury subpoena and who needs legal assistance. The pitfalls are legion and stem from failure to pay EFLs, losses in client accounts, forgeries, embezzlement, negligent handling of client accounts, churning, bank document alterations, IRS document fraud, mail fraud, wire fraud and the like. Many of our clients were innocent victims of supervisor fraud or their company’s fraud or failure to abide by the federal or state securities laws. This failure to abide by these strict liability laws can be disastrous to an employee who was ignorant of such, but who is in the “chain” of the accused behavior or law violation.