Securities Arbitration and Investment Fraud Lawyers

Securities Arbitration and Investment Fraud Lawyers FINRA Securities Arbitration Investment Fraud Lawyers. National Practice. Contingent fee. Free Consultation. (877) SEC-ATTY. Lawyers for investors. Nicholas J.

FINRA Securities Arbitration. Claims against securities broker-dealers, investment professionals, and financial institutions for fraud, negligence, the sale of unsuitable investments, defective financial products, Ponzi schemes, cybertheft, breach of fiduciary duty, and the failure to supervise. Free confidential consultation. Guiliano has “AV" Rating,” (Highest Rating in Both Legal Ability & Ethi

cal Standards) and Client Champion Martindale Hubbell. AVVO Rating of 10 (Superb), AVVO Five Star Rated Client’s Choice Award, and for more than a decade, Nicholas J. Guiliano has also beenhas also been honored as one of America’s Most Honored Lawyers (Top 10% Nationwide).

In March 2019, Financial Industry Regulatory Authority Public Disclosure reported that Dennis Daniel Herrera (CRD No. 46...
07/29/2026

In March 2019, Financial Industry Regulatory Authority Public Disclosure reported that Dennis Daniel Herrera (CRD No. 4618370), then associated with Aegis Capital Corp., for conduct that was alleged to have transpired at his former firm, Blackbook Capital LLC, the customer initiated investment related arbitration claim based upon allegations that equity transactions effected in the customer’s account were not suitable for the customer was settled for $14,500.00. Financial Industry Regulatory Authority (FINRA) Arbitration No. 15-02006 (Nov. 21, 2016).

Perhaps not long thereafter, in or about, November 2021, Financial Industry Regulatory Authority Public Disclosure reported that Dennis Daniel Herrera, following his association with Laidlaw Company (UK) Ltd., was referenced in a customer initiated investment related FINRA securities arbitration claim in which the customer sought $139,399.00 based upon the allegations that Herrera sold the customer unsuitable investments and also breached his fiduciary duties FINRA Arbitration No. 20-00036 (March 9, 2020). The claim alleges that the customer was placed into unsuitable investments at Aegis Capital Corp.

On November 10, 2005, while he was registered at Hunter Scott Financial LLC, a customer initiated investment related complaint involving Herrera’s conduct was resolved for $40,000.00 in damages based upon allegations that the customer was excessively charged on over-the-counter equities investment transactions executed in the customer’s account especially since those investments poorly performed.

On November 2, 2007, this time when he was registered at Mercer Capital Ltd. another customer initiated investment related complaint concerning Herrera’s activities was settled for $8,628.55 in damages supported by accusations that a stop loss order was executed on the customer’s over-the-counter equities holdings without the customer’s permission.

Then, again, on January 16, 2014, while registered with Blackbook Capital LLC, another customer initiated investment related complaint regarding Herrera’s conduct was resolved for $25,000.00 in damages based upon allegations that Herrera made misrepresentations to the customer concerning private placement investments; and effected stock trades in the customer’s account on an unsuitable and excessive basis. FINRA Arbitration No. 13-00771 (Jan. 16, 2014).

Seems confusing, perhaps it is.

Within the last twenty years, Herrera has been associated with nine (9) securities broker-dealers, seven (7) of which have been expelled for the violation of the federal securities laws or self-regulatory rules, or are otherwise defunct, including Blackbook Capital LLC (CRD No. 123234)( FINRA expelled the firm on 06/28/2016); Charles Vista LLC (FINRA expelled the firm on 01/02/2014); John Thomas Financial (CRD No. 40982)(FINRA expelled the firm on 10/31/2013); Mercer Capital Ltd. (CRD No. 104012)(terminated March 20, 2010); Hunter Scott Financial LLC (CRD No. 45559)(FINRA expelled the firm on 10/09/2014); Park Capital Securities, LLC (CRD No. 104206)( FINRA expelled the firm on 09/29/2005); J.P. Turner & Company, L.L.C. (CRD No. 43177)(terminated April 4, 2010).

Stockbroker Migration

It is not uncommon when stockbrokers, or more descriptively a “crew” of stockbrokers, associated with an expelled or rogue firm jump ship or migrate, en masse, to a new firm, where they continue to ravage, rob and plunder some unsuspecting corn farmer in Illinois. All they need is a telephone, a list of leads (usually in the form of customer account information that they steal from each other), and have some sort of house chop stock, or thinly traded bond, with a story to peddle to the unsuspecting investment public. Often, or at least sometimes, the real party in interest, or the “owners” of the respective pirate ship/branch offices, is a barred or expelled individual, or even long before the Sopranos, is an alleged, or sometimes even convicted, member of organized crime. Richard H. Walker, Director, Division of Enforcement U.S. Securities & Exchange Commission, The Involvement of Organized Crime on Wall Street (September 13, 2000). It is not just the Italians. One firm in New York, that had been compromised by the Russian Mafia, had more than twenty agents all posing as “Vlad,” the one idiot that was actually registered.

In any event, the term for this migration from expelled broker-dealer to soon to be expelled broker-dealer is called “cock-roaching.” FINRA News Release, September 15, 2015 “FINRA Sanctions 10 Former Global Arena Representatives as a Result of FINRA Crackdown on Broker Migration”); FINRA Targets ‘Cockroaching,’ Eyes Frontier-Fund Marketing - Focus on Funds - Barrons, Sept. 15, 2015 (“FINRA cracks down on “cockroach” brokers. Regulator bars 10 at New York broker-dealer Global Arena Capital Corp. after investigating brokers who migrated from an expelled firm”); Letter of October 25, 2015, U.S. Senator Edward Markey (D-Mass) to Richard Kethcum, Chair & Chief Executive officer FINRA (“with respect to the ‘cockroaching’ problem, FlNRA simply must do a better job of tracking and removing unscrupulous brokers from the industry.”).

Again, being associated with almost a dozen of these firms, with only a few actual complaints is quite remarkable. Moreover, as set forth below, it is entirely feasible, at least in one case, as Herrera testified that “he had no role in handling this customer’s account and was not responsible for any investment advice, or ex*****on of any trades.” Customers, and customer account documents are stolen and passed around an office, from broker to broker, from firm to soon to be defunct firm. Lawyers want to sue everyone. However, Mr. Herrera seems to have been added as a party to one such action by an “non-attorney representative firm.”

At least one of these “firms” has been known to purchase or obtain customer account information from these rogue firms and/or brokers, and have been known to “cold-call” the investor victims with the promise of recovering lost funds in exchange for an up-front, non-refunable “consulting fee.”

The Quest For Expungement

It did not however stop Mr. Herrera from suing them or bringing an action in arbitration before the Financial Industry Regulatory Authority seeking to expunge his Public Disclosure record.

On July 20, 2020, Herrera filed an his expungement claim against BlackBook Capital LLC, Hunter Scott Financial LLC, John Thomas Financial, Charles Vista LLC, and Aegis Capital Corp. FINRA Arbitration No. 20-02282.

While Herrera initially sought the expungement of Occurrence Numbers 1330218, 1376926, 1649154, and 1763136, he withdrew his request for expungement of Occurrence Numbers 1376926 and 1649154. With the exception of Blackbook Capital, which only filed an answer, none of the Respondents, including the defunct or barred Respondents opposed Herrara’ request or appeared at the hearing. None of the customers also did not appear at the hearing.

At the hearing, Herrera testified that “he had no role in handling this customer's account and was not responsible for any investment advice, or ex*****on of any trades; and no role in discussing performance of investments or commissions. Claimant only received a salary and did not share in the commissions generated from the activity in the customer's account.”

Herrera’s request for expungement was granted.

On September 11, 2020, Herrera a second expungement claim this time against expelled Hunter Scott Financial LLC, expelled John Thomas Financial, and Aegis Capital Corp. FINRA Arbitration No. 20-03220 seeking to expunge Occurrence Numbers 1649154 (“Customer A”) and 1376926 (“Customer B”) from his Public Disclosure records.

Adversarial Failure

According to one scholar, FINRA arbitrators accustomed to adjudicating genuinely contested disputes, “mistakenly expect that the lawyers and parties appearing before them will raise all relevant facts as well as applicable law and rules. They may also expect that, collectively, participating parties have some incentive to bring reasonably pertinent information to the adjudicator’s attention.” Edwards, Benjamin P., Edwards, Benjamin P., Adversarial Failure, Washington and Lee Law Review (Aug 2020).

According to Professor Edwards, one study of over a thousand expungement awards found that customers appeared only 13% of the time. See Honigsberg & Jacob, Deleting Misconduct: The Expungement of BrokerCheck Records, J. FINAN. ECON., See also, Lisa Bragança & Jason Doss, How Expungement-Only Cases Are “Gamed, Exploited and Abused” by Brokers, Financial Planning (Oct. 29, 2019). This same study found that brokerage firms “did not object or otherwise oppose the individual broker’s expungement request over 98% of the time.” Moreover, “[f]ew lawyers will assist customers and oppose expungements on a pro bono basis.

The result is “adversarial failure” which occurs when parties to a dispute have either aligned interests or no real incentive to contest. The result is also an “alarmingly” high percentage of arbitration cases resolved by settlement or by stipulated awards where expungement relief has been granted.” Expungement Study of the Public Investors Arbitration Bar Association (October 16, 2013).

In fact, according to Investment News, most the Respondent broker-dealers have no interest in opposing expungement, particularly where there are no compensatory damages sought, they most often do not participate in arbitrator selection. According to AdvisorLaw’s founder, Dochtor Kennedy, J.D., M.B.A., his success is also attributable to identifying and selecting arbitrators, that have a history of granting expungement.

Stockbroker Recividism

Notably, brokers who successfully expunge complaints from their record “are 3.3 times as likely to engage in new misconduct as the average broker.” See Colleen Honigsberg & Matthew Jacob, Deleting Misconduct: The Expungement of BrokerCheck Records, J. FINAN. ECON. (2020).

In September 9, 2025, Herrera was the subject of another customer intiated, investment related FINRA securities arbitration claim where the customers allege breach of fiduciary duty, unsuitable investments, material misrepresentations, material omissions, breach of FINRA rules and breach of contract on the part of Registered Representative in relation to the customers investments. FINRA Arbitration No. 20-00036.

In fact, only a few weeks earlier on August 8, 2025, Herrera was the subject of a FINRA Enforcement Action which was resolved by way of Acceptance, Waiver and Consent (AWC No. 2022073724201).

According to the AWC, “between January 2019 and February 2023, Herrera recommended to two retail customers a series of trades that were excessive, unsuitable, and not in the customers' best interests.” Again according to the AWC:

In September 2017, Customer A, then a 68-year-old plumber, opened an account at Aegis. Between January 2019 and February 2023, Herrera recommended 205 transactions in Customer A's account resulting in an annualized turnover rate of 12 and an annualized cost-to-equity ratio of 25 percent. Customer A relied on Herrera's advice and routinely followed his recommendations, and, as a result, Herrera exercised de facto control over the account. Herrera's trading in Customer A's account generated $123,557 in commissions and caused $270,219 in realized losses.

In February 2017, Customer B, then a 56-year-old oil and gas consultant, opened an account at Aegis. Between June 30, 2020, and December 2022, Herrera recommended 118 transactions in Customer B's account resulting in an annualized turnover rate of six and an annualized cost-to-equity ratio of 28 percent. Herrera's trading in Customer B's account generated $34,943 in commissions and caused $88,760 in realized losses.

The level of trading that Herrera recommended in the two customers' accounts was excessive. It was unsuitable for Customer A, and not in the best interest of either customer.

As set forth in the AWC, Reg BI's Care Obligation, set f01ih at Exchange Act Rule 15/-1 (a)(2)(ii), requires broker-dealers and their associated persons to exercise reasonable diligence, care, and skill to, among other things, have a reasonable basis to believe that a series of recommended transactions, even ifin the retail customer's best interest when viewed in isolation, is not excessive and is in the retail customer's best interest in light of the retail customer's investment profile.

No single test defines when trading is excessive, but factors such as the turnover rate, the cost-to-equity ratio, and the use of in-and-out trading in a customer's account are relevant to determining whether an associated person has excessively traded a customer's account in violation of Reg BI. The turnover rate represents the number of times that a portfolio of securities is exchanged for another portfolio of securities. The cost-to-equity ratio measures the amount an account must appreciate just to cover commissions and other expenses. In other words, it is the break-even point where a customer may begin to see a return. A turnover rate of six or more, or a cost-to-equity ratio above 20 percent, generally indicates that a series ofrecommended transactions was excessive.

Prior to June 30, 2020, FINRA Rule 2111 required members and associated persons to have a reasonable basis to believe that a recommendation of a transaction or investment strategy involving a security or securities to any customer is suitable for the customer.

Under Rule 2111.05(c), members and associated persons with actual or de facto control over an account were required to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, is not excessive and unsuitable for the customer in light of the customer's investment profile.

FINRA Rule 2111 is still in effect, but as of June 30, 2020, it no longer applies to recommendations that are subject to Reg BI, and the element of control was removed from the quantitative suitability component.

As a result, Herrera was found that he willfully violated the Best Interest Obligation under Rule 151-1 (a)(l) of the Securities Exchange Act of 1934 (Regulation BI or Reg BI) and violated FINRA Rules 2111 and 2010. For these violations, Herrera was suspended for six months in all capacities, fined $5,000, and ordered to pay restitution of $158,500 plus interest.

The AWC also provides that Herrera “may not take any action or make or permit to be made any public statement, including in regulatmy filings or otherwise, denying, directly or indirectly, any finding in this AWC or create the impression that the AWC is without factual basis.

Mr. Herrera’s suspension ended March 1, 2026.

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The Financial Industry Regulatory Authority or "FINRA" is conducting a review of firm practices related to supervision o...
07/07/2026

The Financial Industry Regulatory Authority or "FINRA" is conducting a review of firm practices related to supervision of concentrations in non-principal protected “worst-of” structured notes, a higher risk structured product. FINRA is examining how firms ensure compliance with Regulation Best Interest (Reg BI)—including Reg BI’s care and conflict of interest obligations—and with FINRA rules when they permit their registered representatives to recommend those products to their customers.

The term structured notes or “structured note with principal protection” refers to any structured product that combines a bond with a derivative component and that offers a full or partial return of principal at maturity. financial industry regulatory authorityStructured products in general do not represent ownership of any portfolio of assets but rather are promises to pay made by the product issuers. Structured notes with principal protection typically reflect the combination of a zero-coupon bond, which pays no interest until the bond matures, with an option or other derivative product whose payoff is linked to an underlying asset, index or benchmark. The investor is entitled to participate in a return that is linked to a specified change in the value of the underlying asset.

“Structured notes” are “complex,” often high risk, investment products.” According to FINRA, “structured notes” or “structured products” are securities derived from or based on a single security, a basket of securities, an index, a commodity, a debt issuance and/or a foreign currency. Most structured products pay an interest or coupon rate substantially above the prevailing market rate. However, structured products also frequently cap or limit the upside participation in the referenced or “Linked” security or basket of securities, but if the underlying “Linked” securities decline in value, the Note may be redeemed or called by the Issuer at a predetermined rate, or often a fraction of the Note’s offering price, which can result in the substantial loss of principal.

The retail market for structured notes with principal protection has been growing in recent years. While these products often have reassuring names that include some variant of “principal protection,” “capital guarantee,” “absolute return,” “minimum return” or similar terms, they are not risk-free. Any promise to repay some or all of the money invested will depend on the creditworthiness of the issuer of the note and investors could lose all of their money if the issuer of the Note goes bankrupt.

Notice to Members 05-09 (“despite the derivative component of a structured product, they are often marketed to investors as debt securities.”); See also, Staff Summary Report on Issues Identified in Examinations of Certain Structured Securities Products, U.S. Securities & Exchange Commission (July 27, 2011)(“Structured Security Products are often quite complex and can present wide-ranging risks and regulatory issues, including suitability and disclosure concerns, limited liquidity, comparatively opaque and often expensive fee structures, and difficulty in pricing. They also pose supervisory, compliance and sales training challenges.”).

With respect to Structured Products, FINRA has cautioned that:

a member has an obligation to perform a reasonable basis suitability determination before recommending a product to investors. A reasonable basis suitability determination is necessary to ensure that a security—in this case a structured product—is suitable for some investors (as opposed to the customer-specific suitability determination, which is made on an investor-by-investor basis). To discharge its reasonable basis suitability obligation, a member must perform appropriate due diligence to ensure that it understands the nature of the product, as well as the potential risks and rewards.

* * *

Members should consider whether an investment in a structured product meets the reasonable basis suitability standard if the instrument is priced such that the potential yield is not an appropriate rate of return in relation to the volatility of the reference asset based upon comparable or similar investments, in terms of structure, volatility, and risk in the market as determined at the time the structured product is issued.

* * *

Under Rule 2310, members must ensure that a recommendation is suitable for a specific customer by examining (1) the customer’s financial status, (2) the customer’s tax status, (3) the customer’s investment objectives, and (4) such other information used or considered to be reasonable by such member or registered representative in making recommendations to the customer.

FINRA Notice to Members 05-59 (September 2005).

Many Structured Notes Offer Only Partial Protection

Moreover, many of these products are loaded upon with conditions as to the protection, or which only offer partial protection. In these cases, investors will lose their principal investment even if the issuer does not go bankrupt. Of those notes where investors will receive some principal protection from the issuer, investors are required to hold these investments until maturity.

Also, any guarantee that the principal will be protected, is only as good as the financial strength of the company that makes that promise.

In other words, the principal guarantee is subject to the creditworthiness of the guarantor, which is generally the securities firm that structures and issues the note. In the event the issuer goes bankrupt, investors who hold these notes are considered unsecured creditors and might recover little, if anything, of their original investment.

Investors needing cash before maturity, need to know that no secondary market often exists for them to sell these notes and there is no obligation for the issuer to repurchase them. Even where a secondary market exists, investors can only expect to receive pennies on the dollar.

According to FINRA's survey, unless otherwise noted, the relevant period for each request is January 1, 2022, through December 31, 2025 (the “Relevant Period”). In addition, if your response varies over the Relevant Period, please explain the differences in your response.

Provide copies of the firm’s written supervisory procedures (WSPs) related to structured notes and complex products.

Describe how the firm categorized structured notes for supervision purposes, including classifications, if any, based on product risk such as principal protection or “worst-of” features.

Describe any restrictions or limitations the firm placed on recommendations of structured notes (including non-principal protected, worst-of structured notes), including but not limited to concentration limitations.

Describe any supervisory alerts/exceptions the firm had in place for structured notes (including but not limited to any concentration alerts or Reg BI/suitability alerts) and the corresponding trigger criteria.

Did the firm provide structured product trainings? If so, please provide any materials and state whether the firm required representatives to complete the training prior to selling structured products.

State how registered representatives were compensated for sales of structured notes.

Describe how the firm identifies and mitigates product-related conflicts of interest associated with recommendations of structured notes.

Did the firm provide general information to customers concerning structured notes, including non-principal protected, worst-of structured notes, and/or information about the compensation received by the firm or representatives on sales of such notes? If so, please provide copies of documents reflecting that information and explain how it was used.

“Worst-of” structured notes refers to principal-at-risk structured notes that may result in a reduction or cessation in interest payments, and/or a reduced return of principal at maturity, based on the worst-performing asset in a group of two or more reference assets.

Firms whose brokers advise their clients on a certain type of complex investment product known as structured notes should be prepared to answer questions about how and why they recommend these securities. FINRA, the brokerage industry’s self-regulatory organization, is conducting a series of exams exploring how firms are handling structured notes where an investor’s principal is at risk. Regulators say these products have caused substantial client losses.

Key Areas for WSP Review

Member firms are on notice that their WSPs are going to be scrutinized. Of course, each firm’s review and potential enhancements will be unique depending on a firm’s product mix, business model, and existing compliance infrastructure, but all firms will need to pay close attention to several key areas:

WSP Completeness and Specificity. FINRA will ask to review WSPs with a focus on structured notes and complex products. Firms should ensure they have specific, standalone procedures addressing structured notes rather than relying on general complex-product language.

Product Risk Categorization. FINRA expects firms to have a tiered classification system that distinguishes among structured note types based on risk characteristics, including principal protection and worst-of features.

Concentration Limits and Restrictions. Clearly defined and enforceable concentration limits at both the individual account and portfolio level, with heightened restrictions for higher-risk sub-categories such as non-principal protected worst-of notes are a must.

Supervisory Alerts and Exception Monitoring. Firms must maintain surveillance mechanisms that flag concentration threshold breaches, risk-profile mismatches, and other red flags, with clearly specified trigger criteria.

Training Requirements. Firms should mandate and document product-specific training for all representatives before they are authorized to recommend or sell structured notes to customers.

Compensation Transparency. FINRA is specifically focused on how representatives are compensated for structured note sales, including commissions, markups, and selling concessions.

Compensation structures must be clearly documented because of the conflict-of-interest implications they carry.

Conflict of Interest Identification and Mitigation. Firms need a systematic process to identify and address conflicts arising from compensation, proprietary preferences, issuer relationships, and revenue-sharing. The WSPs should also clearly document mitigation measures. This ties directly to Reg BI's conflict of interest obligation.

Customer Disclosure Practices. Firms should be prepared to demonstrate that they provide customers with clear information about structured note risks and compensation, including product fact sheets and risk disclosures delivered in a timely manner.

The bottom line for investors is that structured notes with principal protection can lose their entire investment or depending on how the note is structured, could tie up their principal for upwards of a decade with the possibility of no profit on your initial investment.

If you have lost money as the result of the recommendation and sale of structured products, you should consult with an attorney to determine your rights and obligations.

Nicholas J. Guiliano has more than thirty years experience representing investors. He is “AV Rated,” (Highest Rating in Both Legal Ability & Ethical Standards) by Martindale Hubbell, and has also been selected as a Martindale Hubbell Client Champion. Mr. Guiliano has an AVVO Rating of 10 (Superb), has received the AVVO Five Star Rated Client’s Choice Award, and for more than a decade, Nicholas J. Guiliano has also been honored as one of America’s Most Honored Lawyers (Top 10% Nationwide).

The Guiliano Law Group, P.C. National practice exclusively representing investors in claims against brokerage firms for securities fraud, the sale of unsuitable investments, defective financial products, breach of fiduciary duty, and the failure to supervise. FINRA Securities Arbitrations. Contingent fee. Free Consultation.

The Financial Industry Regulatory Authority or “FINRA” is conducting a review of firm practices related to supervision of concentrations in non-principal protected “worst-of” structure…

In 1817, probably under the old Oak Tree next to the Trinity church, The New York Stock Exchange (NYSE) first introduced...
07/07/2026

In 1817, probably under the old Oak Tree next to the Trinity church, The New York Stock Exchange (NYSE) first introduced arbitration to the securities industry to resolve disputes among its members, however, 154 years ago, in 1872, the became the first securities exchange to offer arbitration for customer disputes against members, and in 1869 it amended its constitution to require “members” to submit to arbitration if requested by a non-member or customer. (In fact, legally, a “customer” is everyone who is not a “member”).

Submit or be eaten. Most people do not know that Financial Industry Regulatory Authority or FINRA is a private, not-for-profit organization with approximately $1.7 billion in net assets as of December 31, 2025. In 2024, FINRA reported a net income of $99.6 million.

The New York Stock Exchange (NYSE) first introduced arbitration to the securities industry in 1817 to resolve disputes among its members. This internal mechanism was later expanded in 1872* to allow customers to arbitrate disputes with members, establishing an early, informal alternative to court litigation.

Key historical points regarding the first NYSE arbitrations:1817 Origin: The NYSE constitution first provided for the internal resolution of disputes among members.1872 Expansion: The NYSE became the first securities exchange to offer arbitration for customer disputes against members.

1869 Amendment: The NYSE amended its constitution to require members to submit to arbitration if requested by a non-member.Goal: It was designed as an inexpensive and efficient forum to resolve disputes, particularly necessary as stock values changed rapidly.These early efforts laid the groundwork for modern securities arbitration, which later consolidated under FINRA in 2007.

Supposedly, the “goal” was to provide “an inexpensive and efficient forum to resolve disputes, particularly necessary as stock values changed rapidly.” However, in reality, arbitration, particularly securities arbitration, much like disputes in other industries, by arbitrators with knowledge of industry rules, customs and standards.

These early efforts laid the groundwork for modern securities arbitration, which later consolidated under FINRA in 2007.

Just after the November 2024 election, The Financial Industry Regulatory Authority has quietly scrubbed its website of pages promoting the broker regulator’s racial justice and diversity, equity, and inclusion efforts amid a conservative backlash against DEI programs.

A FINRA web page titled, “Working to Advance Racial Justice,” disappeared this month, according to a Bloomberg Law review of the nonprofit organization’s website. A “Diversity, Equity & Inclusion (DEI)” page vanished sometime after an internet archiving tool last spotted it in July.

Both now redirect to an “Inclusive Workplace” page, describing FINRA’s commitment “to fostering an inclusive and equitable workplace” within its own offices. Direct references to “racial justice,” the phrase “diversity, equity, and inclusion,” and the “DEI” acronym are absent from the page, as is information about related FINRA initiatives targeting the brokers the organization oversees and the communities they serve. The changes came as FINRA reworked the design and content of its home page this year.

FINRA, which Congress authorized to police more than 624,000 brokers, “should be abolished,” according to the Project 2025 “Mandate for Leadership: The Conservative Promise,” a roadmap for a Republican administration which warns financial regulators against pursuing DEI policies, drawing on concerns the programs are discriminatory. President-elect Donald Trump has tried to distance himself from the project’s recommendations, though former officials and trusted advisers from his presidential administration spearheaded the effort.

A conservative anti-DEI campaign has led Ford Motor Co., Lowe’s Cos., and other companies to rejigger policies. The National Legal and Policy Center also has introduced proxy proposals pressuring the boards of McDonald’s Corp., JPMorgan Chase & Co., and American Express Co. to reconsider current policies linking executive pay to diversity goals.

The House Oversight and Accountability Committee on Wednesday is marking up a bill that would dismantle DEI programs at agencies across the federal government and for companies that hold federal contracts. The bill faces long odds of being enacted this session of Congress with time running out on the calendar and Democrats in control of the Senate. But it signals potential priorities next year with Republicans leading both chambers and Trump returning to the White House.

“FINRA has been revamping FINRA.org over a period of months as we continually work to improve the user experience, and that process is ongoing,” FINRA spokesperson Ray Pellecchia said in a statement to Bloomberg Law on Tuesday. He declined to comment further.

‘Diversity’ Becomes ‘Differences’

FINRA’s racial justice page had existed since at least 2021, detailing its efforts to fight racism and discrimination within the organization, the financial services industry, and elsewhere, according to information preserved by internet archiver the Wayback Machine. The page, last archived in August, served as an information hub for a now-defunct Racial Justice Task Force at FINRA.

The regulator created the task force in 2020 after George Floyd’s murder by police led to a corporate reckoning over the treatment of minorities. FINRA disbanded the task force in 2022, folding the group’s work into the Diversity Leadership Council the regulator created in 2009. The council has 22 FINRA employees “tasked with developing and implementing a robust diversity and inclusion strategy” at the organization, according to the group’s web page.

The racial justice page listed several FINRA initiatives, including investor education aimed at diverse communities, outreach to underrepresented firms, and the regulator’s Industry Diversity Advisory Committee. The panel, launched in 2022 to improve DEI in the securities industry, is still active.

FINRA Is Giving BDs a Heads-Up About Exams.

In January, FINRA "started to notify member firms not only about this initiative, but also the quarter during which we plan to conduct an examination," Reese continued. "Again, this change supports our FINRA Forward [rulebook revamp] goals by providing firms greater visibility around resource planning and allocation while maintaining, of course, the flexibility we need for our risk-informed examination approach."

For more almosy thirty years, the whole idea was "unannounced" office inspections. In January 1997, the SEC issued a warning that:

the securities industry should be on notice, however, that where a firm employs branch offices made up of only one or two registered representatives and those individuals engage in misconduct, the Commission will, as it does for all firms, closely examine the responsibility of individuals charged with the duty to design and implement an adequate system of supervision.

In re Royal Alliance Associates., 63 S.E.C. Docket 1601 at 7.

Following the SEC decision, in May 1998, the NASD issues Notice to Members 98-39, reminding members of their Supervisory And Inspection Obligations, and suggesting that “Members should note the Royal Alliance” decision, which among other things “emphasized the need for close attention to supervision of small, dispersed offices.” NASD Notice to Members 98-38 at 274 (May 1998)(Appendix “E”).
NASD Notice to Members 98-38 also stated that:

The purpose of this Notice is to remind members of their supervisory and inspection obligations for all of their associated persons and offices. Member firms must supervise all of their associated persons—regardless of location, compensation or employment arrangement, or registration status—in accordance with the NASD By-Laws and Rules. The fact that an associated person conducts business at an unregistered office or is compensated as an independent contractor does not alter the obligations of the individual and the firm to comply fully with all applicable securities regulatory requirements.

NASD Notice to Members 98-38 at 273 (May 1998).

In June 1999, the NASD issued Notice to Members 99-45, offering specific guidance as to the types of activities a member must review that occur at each of its offices, and again recognizing that:

Some associated persons working in these unregistered offices may be involved in other business enterprises, such as insurance, real estate sales, accounting, tax planning, or investment advisory services, and consequently may be classified for compensation purposes as part-time employees or independent contractors. Some unregistered offices also operate as separate business entities under
names other than those of the members.

While the NASD does not encourage or discourage such arrangements, a large number of geographically diverse offices presents the potential that sales practice problems will not be as quickly identified as in larger, centralized branch offices. This increased potential must be taken into account when drafting supervisory procedures.

NASD issued Notice to Members 99-45 at 296 (June 1999) See also, Sarah B. Estes, Supervision of Independent Broker Dealers: From Royal Alliance to NTM 99-45, North American Securities Administrator Assoc., Enforcement Law Reporter (2000)(supervision of non-traditional broker-dealer network offices).

Similarly, in March 2004, the SEC issued Staff Legal Bulletin No. 17, concerning: Remote Office Supervision (and again referencing the Royal Alliance decision in a footnote), and expressing the Staff’s concern that:

Some broker-dealer firms have geographically dispersed offices staffed by only a few people, and many are not subject to onsite supervision. Their distance from compliance and supervisory personnel can make it easier for registered representatives (representatives) and other employees in these offices to carry out and conceal violations of the securities laws

Staff Legal Bulletin No. 17 (March 19, 2004).

FINRA Foward is really Investor Backwards.

Nicholas J. Guiliano has more than thirty years experience representing investors. He is “AV Rated,” (Highest Rating in Both Legal Ability & Ethical Standards) by Martindale Hubbell, and has also been selected as a Martindale Hubbell Client Champion. Mr. Guiliano has an AVVO Rating of 10 (Superb), has received the AVVO Five Star Rated Client’s Choice Award, and for more than a decade, Nicholas J. Guiliano has also been honored as one of America’s Most Honored Lawyers (Top 10% Nationwide).

The Guiliano Law Group, P.C. National practice exclusively representing investors in claims against brokerage firms for securities fraud, the sale of unsuitable investments, defective financial products, breach of fiduciary duty, and the failure to supervise. FINRA Securities Arbitrations. Contingent fee. Free Consultation.

https://securitiesarbitrations.com/news/maga-grifters-and-corporate-special-interests-obliterate-154-years-of-investor-protection/

In 1817, probably under the old Oak Tree in Trinity square, The New York Stock Exchange (NYSE) first introduced arbitration to the securities industry to resolve disputes among its members, howeve…

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