This post is designed to provide a summary of various rules and regulations requiring the establishment and enforcement of supervisory responsibilities over remote activities of a firm’s business activities. It is being presented for educational purposes only and thus, is not designed to be complete in all material respects. If you have any questions, you should contact a qualified professional.

Introduction

The Securities and Exchange Commission has provided guidance relative to “Remote Office Supervision.” Sections 15(b)(4)(E)1 and 15(b)(6)(A) 2 of the Securities Exchange Act of 1934 (Exchange Act) authorize the Commission to impose sanctions on a firm or any person that fails to reasonably supervise a person subject to their supervision that commits a violation of the federal securities laws. Section 15(b)(4)(E) also provides an affirmative defense against a charge of failure to supervise where reasonable procedures and systems for applying the procedures have been established and effectively implemented without reason to believe such procedures and systems are not being complied with. The Commission’s policy regarding failure to supervise is well established. The Commission “has long emphasized that the responsibility of broker-dealers to supervise their employees is a critical component of the federal regulatory scheme. A broker-dealer must develop a system for implementing its procedures that could reasonably be expected to prevent and detect securities law violations. In addition, a broker-dealer must have an appropriate system of follow-up and review if red flags are detected. However, establishing policies and procedures alone is not sufficient to discharge supervisory responsibility. It is also necessary to implement measures to monitor compliance with those policies and procedures.

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. The supervision of small, remote offices, therefore, can be especially challenging. The Commission staff has examined branch offices and the Commission has brought numerous enforcement cases involving inadequate supervision of these small, remote offices. These cases address situations in remote offices where supervisory mechanisms failed to detect and prevent misconduct.

Policies and Procedures

Clearly articulated and vigorously enforced policies and procedures, with sufficient resources to implement them, are an essential part of a supervisory system for remote offices. Comprehensive policies and procedures address all aspects of a remote office’s operations. The following policies and procedures may form part of an effective supervisory system.

Inspections. Inspections are a vital component of a supervisory system. The Commission has determined that broker-dealers that conduct business through remote offices have not adequately discharged their supervisory obligations where there are no inspections of those offices. Effective inspections can detect misconduct in its infancy, deter future wrongdoing, and prevent or mitigate investor harm. An effective supervisory system employs a combination of onsite and offsite monitoring, including the use of unannounced inspections and mechanisms for verifying that deficiencies are corrected.

Routine or “For Cause” Inspections. Onsite inspections usually take one of two forms: routine or “for cause.” Routine inspections are conducted in the ordinary course of business, while “for cause” inspections are conducted upon learning about a specific event or potential violation. It is suggested that all inspections include at least: (1) a review of a sampling of customer files, including account opening documents and trading records; (2) a review of the signature guarantee log; (3) a review of correspondence, advertisements, and sales literature made available at the remote office; (4) a review of business records, including physical and computer files; (5) in-person questioning of the representative by the supervisor about business activities, including inquiry about any unusual activity; and (6) in-person interview by the supervisor of the representative’s assistant or support staff, if any, about the remote office’s business and any unusual activity. If during the course of the examinations deficiencies are identified, examiners should consider the need to conduct a more in-depth review.

Unannounced Inspections. Routine or “for cause” inspections may be either announced or unannounced. Unannounced inspections are conducted on a random, surprise basis. Firm’s are encouraged to use unannounced, onsite inspections of remote offices to enhance supervision. They can deter and detect misconduct because they diminish the opportunity for concealment, removal, or destruction of the evidence of misconduct.

In addition, a supervisor is more likely to uncover evidence of misconduct in customer files, such as fictitious account statements, during an unannounced inspection than in an announced inspection that gives the representative an opportunity to remove such documents from customer files. An unannounced inspection might also reveal marketing materials that describe unapproved products, local billboards with unapproved advertisements, or customer account statements showing purchases of unapproved securities.

Unannounced inspections could be employed at random, as well as when triggered by “red flags” warning of potential misconduct. When indications of impropriety reach the attention of those in authority, they must act decisively to detect and prevent violations of the federal securities laws. Red flags that could suggest the existence or occurrence of illegal activity and might prompt an unannounced inspection include: (1) customer complaints; (2) a large number of elderly customers; (3) a concentration in highly illiquid or risky investments; (4) an increase or change in the types of investments or trading concentration that a representative in a remote office is recommending or trading; (5) an unexpected improvement in a representative’s production, lifestyle, or wealth; (6) questionable or frequent transfers of cash or securities between customer accounts, or to or from the representative; (7) the disciplinary history of the representative; (8) substantial customer investments in one or a few securities or class of mutual fund shares that is inconsistent with firm policies related to such investments; (9) churning; (10) trading that is inconsistent with customer objectives; or (11) significant switching activity of mutual funds or variable products held for short time periods. It is equally important that representatives do not obtain advance notice about a particular focus of an inspection. Advance notice of the focus affords representatives an opportunity to “doctor” particular records.

Offsite Monitoring of Trading, Handling of Funds, and Use of Personal Computers. Centralized technology to monitor the trading and handling of funds in remote office accounts, as well as the use of personal computers, helps detect misappropriation of customer funds, selling away, and unauthorized trading, among other things. Thus, if firms permit communications with customers from employees’ home computers or personal computers not connected to the firm’s network, SRO rules require firms to employ systems to monitor those communications.

Designate supervisory responsibility. Explicit delineation of the supervisory hierarchy, including the designation of a direct supervisor for each representative and the assignment of specific supervisory responsibilities to the supervisor, is a necessary part of a firm’s supervisory structure. Consideration should be given to the independence of supervision when supervisory responsibility is designated. For example, one factor firms should consider is whether the supervisor stands to benefit from the representative’s sales activities. No individual can supervise themselves. As with all supervisory procedures, the Commission has stated that firms should provide a system of review and follow-up to ensure that supervision (by a branch manager or a producing manager) is diligently exercised. The Commission also encourage firms to review the number of representatives for whom a supervisor is responsible as well as the number, nature, and extent of remote offices that an office of supervisory jurisdiction oversees. The degree of supervisory effectiveness is likely to decrease if a supervisor does not have adequate resources to oversee all of the representatives for whom he or she is responsible.

Carefully review FINRA Forms U-4 and U-5 when hiring representatives. Firms should be especially cautious about employing personnel with disciplinary histories. Where a representative with a disciplinary history is employed in a remote office, the Commission has repeatedly emphasized the need for heightened supervision of the representative. Where a representative has left a firm for cause or changed firms several times, the hiring firm should try to ascertain the reason for the changes and contact prior firms as necessary.

Closely monitor outside business activities and selling away. A firm should have adequate procedures for reviewing, analyzing, or following up on the information representatives provide concerning outside activities.46 In addition, a firm should be alert to and investigate “red flags” indicating possible undisclosed outside business activities and assess all outside business activities by a representative, whether or not related to the securities business. The Commission has recognized that there is a risk that representatives will use outside business activities to carry out or conceal securities law violations. A representative appearing to live more lavishly than his business income would allow might be a “red flag” indicating pursuit of improper or outside business activities. Additionally, it is suggested that firms be wary of a representative who owns a company with a name similar to the name of the firm. A customer may make a check payable to the firm that could be altered by a representative and deposited into a bank account in the name of the company he owns.

Implement procedures to detect financial misconduct. It is suggested that firms consider implementing procedures to prevent and detect the following improper activities: (1) the receipt of checks made payable to a representative or any outside business of a representative; (2) the opening of a bank account in the firm’s name or any name similar to the firm’s name by a representative; (3) the receipt of cash and securities by a representative; (4) frequent or questionable transfers of funds or securities between customer accounts; (5) use of a post office box or an address associated with the representative for customer accounts; and (6) the transfer of customer funds or securities to employee accounts without supervisory approval. Inspections and thorough investigations of customer complaints can help detect financial misconduct.

Education for representatives. It is incumbent on firms to provide representatives with training so that the representatives understand the responsibilities under the firm’s procedures, as well as under the securities laws and rules applicable to their business. As with all compliance and sales practice matters, firms are more likely to prevent misconduct if they provide training for representatives and periodically reinforce that training.

Monitor and verify customer address changes. SEC rules require firms to send notification of a change of address to a customer’s old address for each account with a natural person as a customer or owner. This verification enhances customer protection, and we encourage firms to send such verifications for all customer address changes. Moreover, a customer address change to a post office box or an address affiliated with a representative warrants additional steps to verify that the change is genuine.

Record use of the signature guarantee stamp. A firm should have procedures to deter misuse of the signature guarantee stamp to prevent forgeries. These procedures might include maintaining a log of all uses of the stamp and using a stamp with a counter that records each use of the stamp.

Maintain copies of and review incoming and outgoing correspondence. The Exchange Act and rules thereunder require firms to maintain copies of incoming and outgoing correspondence, while SRO rules require firms to review and retain such correspondence, including all documents, reports, profit and loss statements, e-mails, or other materials sent to customers by a representative or received from customers. Firms can enhance the effectiveness of their inspections by reviewing e-mails between representatives. One method of monitoring use of facsimile machines in remote offices is to program these machines to automatically send duplicate incoming and outgoing facsimiles to an office of supervisory jurisdiction.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

What is a fund liquidation?

A fund liquidation occurs when a fund closes down its operations completely, sells off its assets and generally distributes substantially all of its assets in cash to its shareholders. Fund liquidations may occur for a variety of reasons, including poor performance, a decline in assets under management, lack of investor interest, and more. A liquidation is different than a merger where one fund acquires the assets of another fund. In a merger, shareholders in the “acquired” fund receive shares of the new, “acquiring” fund rather than the proceeds from selling off fund assets. During a liquidation, all fund assets are distributed to shareholders.

Who makes the decision to liquidate a fund?

The requirements for liquidating a particular fund generally depend on state corporate or trust law, on the fund’s charter documents, or both. To liquidate, most funds will require a vote by the fund’s board of directors or trustees. In some cases, a vote by the fund’s shareholders will also be necessary. Shareholders may or may not have a say in finalizing the decision to liquidate a fund.

How will I be notified that my fund is liquidating?

If it is necessary to obtain a shareholder vote to approve a liquidation, the fund will have to call a shareholder meeting and seek to obtain the required number of votes. As a shareholder, you will receive a proxy statement informing you of when and where the shareholder meeting is taking place. The timing of this notice to shareholders about a vote is governed by state law and may provide funds some flexibility (for example, requiring notice not less than 10 days and not more than 90 days before a shareholder meeting). Once a fund liquidation has been approved, the notice shareholders receive may depend on both state law and the fund’s charter documents. Some states require that a written notice of liquidation be sent to shareholders, while others do not. A fund’s charter documents may also address providing notice to shareholders. For mutual funds, the approval of a liquidation would generally be considered a material event that would be disclosed to shareholders in a “sticker”–a supplement to a previously sent prospectus or summary prospectus. Funds with shares that trade on an exchange, such as exchange-traded funds (ETFs), generally announce the liquidation through a press release. The notice that shareholders receive regarding a liquidation will generally include relevant information like the date that the fund will stop accepting new purchases of fund shares, the date that the fund will suspend redemptions (if applicable), and the date on or after which all remaining assets will be distributed pro rata (the “liquidation date,” sometimes also called the closing date or cessation date). The timing and type of notice you receive regarding a liquidation will vary from fund to fund.

What do I need to do?

At some point during the liquidation process, many funds stop accepting new purchases of fund shares. If you are making regular contributions to the fund, you may have to stop those contributions by a particular date in advance of the fund closing. In certain cases, funds may also suspend redemptions as part of the liquidation process. Some funds might give you the option to exchange your fund shares into a different fund within the same fund family prior to liquidation. If you own shares of a mutual fund, you can choose to redeem your shares at net asset value at any time prior to the date that the fund suspends redemptions—although sometimes suspension may happen immediately upon the approval of a liquidation. If you own shares of an ETF, you can sell your shares any time before the fund stops trading. After the liquidation date, any remaining fund assets will generally be sold by the fund managers, and the proceeds will be distributed to the remaining fund shareholders. If you still own shares on the liquidation date, you will receive your share of the fund’s assets in this way. The price you receive may differ from the fund’s prior net asset value or trading price. The timing of converting assets to cash or cash equivalents and paying shareholders will vary from fund to fund and may take more time—sometimes months or even years–if the fund has significant investments in less liquid assets. If you still own shares on the liquidation date, you will receive your share of proceeds from the fund’s remaining assets.

WestPark Capital, Inc. (CRD #39914, Los Angeles, California) and Richard Alyn Rappaport (CRD #1885122, Los Angeles, California) November 22, 2021 – An AWC was issued in which the firm was censured, fined $250,000, ordered to offer rescission to customers who invested in notes of the firm’s parent company and have not yet been repaid the full amount of their outstanding principal investment that totaled $1,777,316, required to review and revise, as necessary, its policies, procedures, processes, controls and systems concerning FINRA Rule 3170, and required to extend the time during which it will comply with the requirements of FINRA Rule 3170 for an additional six months. Rappaport was fined $30,000, suspended from associating with any FINRA member in all capacities for four months and suspended from associating with any FINRA in any principal capacity for 15 months. The suspensions are to run concurrently. Without admitting or denying the findings, the firm and Rappaport consented to the sanctions and to the entry of findings that they made negligent misrepresentations and omissions of material facts in offering documents provided to customers in connection with the sale of promissory notes issued by the firm’s parent company. The findings stated that the offering documents failed to disclose that the parent company had defaulted on a $1 million line of credit and had defaulted on successive forbearance agreements with a bank, or that the bank had sued the parent company and Rappaport. Similarly, the offering documents failed to disclose that the parent company had net operating losses each year from 2012 through 2016. In addition, the firm sent prospective investors a misleading historical analysis document, created by Rappaport, that claimed to show investors what they would have received as a return on the notes if the notes had been purchased in 2006 and held through 2010. In fact, the return displayed did not explain that the calculation was based upon hypothetical returns from distinct investments and not any actual return from the notes. The firm, through Rappaport and other firm representatives, also represented to prospective investors that they would be entitled to share in pro-rata distributions of equity and profits from the firm. In fact, the noteholders were entitled to share in pro-rata distributions of equity and profits from the parent company, not the firm, which at times had higher profits and greater equity producing opportunities than the parent company. Moreover, the firm, through Rappaport and other firm representatives, failed to disclose material conflicts of interest. The firm and Rappaport failed to disclose to prospective investors that Rappaport had sole discretion as to whether the parent company’s subsidiaries would make distributions to the parent. By virtue of the foregoing, the firm acted in contravention of Sections 17(a)(2) and (3) of the Securities Act of 1933. The findings also stated that the firm and Rappaport failed to supervise the parent company offerings. The firm, acting through Rappaport, failed to take reasonable steps to ensure that firm representatives who solicited investments in the notes understood the terms of the notes. The firm and Rappaport did not provide reasonable training to registered representatives about the notes and did not respond reasonably to questions from customers that raised red flags that customers lacked accurate information about the notes. The findings also included that the firm violated FINRA Rule 3170 (the “Taping Rule”). The firm’s recording system allowed representatives, at their discretion, to end recording at any time, including before a call was complete. The firm became aware that a representative who sold the parent company offerings terminated at least three recordings before the calls were completed, including a recording of a call with a noteholder, yet the firm did not take any action to ensure that the representative at issue, or other firm representatives, recorded future calls in their entirety. In addition, the firm’s special written procedures concerning the Taping Rule were not reasonably designed. The special written procedures for supervisory review of calls provided no meaningful guidance regarding the review process, frequency of review, or methods of escalating information identified during review. The firm also failed to enforce the provision in its special written procedures requiring the firm to test its taping system to ensure that recordings were properly made and retained. As a result, the firm failed to detect that recordings were deleted prematurely. The suspension in all capacities is in effect from December 20, 2021, through April19, 2022, and the suspension in any principal capacity is in effect from December 20, 2021, through March 19, 2023. (FINRA Case #2017054381603)

Securities and Exchange Act Rules 10-b9 and 15c2-4 contain requirements that must be satisfied in “Contingency” or “Best Efforts” offerings. FINRA (the Financial Industry Regulatory Authority) has provided guidance to broker/dealers regarding the requirements of these rules and to remind broker-dealers of their responsibility to have procedures reasonably designed to achieve compliance with these rules.

Broker-dealers that participate in best efforts public and private securities offerings that have a contingency (i.e., an underlying condition or qualification that must take place by a specified date prior to the issuer taking possession of the offering proceeds) must safeguard investors’ funds they receive until the contingency is satisfied. If the contingency is not met, broker-dealers must ensure that investors’ funds are promptly refunded. There are various contingencies that might need to be satisfied in addition to meeting a subscription amount.

1. Best Efforts Contingency Offerings

In a best efforts offering, a broker-dealer does not commit to purchase any securities from the issuer or guarantee that the issuer will receive any amount of money from the offering (This is in contrast to a firm commitment). Furthermore, a best efforts offering subject to satisfaction of an underlying condition is deemed to be a “contingency offering.” The most common contingency offerings reviewed by FINRA are either “all-or-none” or “part-or-none” offerings that require all or a certain amount of the securities to be sold for the offering to close. Under Securities Exchange Act Rule 10b-9, a best efforts offering subject to either an “all-or-none” or “part-or-none” contingency must provide for the prompt return of investor funds in the event the requisite contingency fails to be met by a specific date.

1. Broker-Dealer Responsibilities in a Best Efforts Contingency Offering.

As discussed in Regulatory Notice 10-22, a broker-dealer that participates in an offering and recommends a security must, among other requirements, conduct a reasonable investigation of the security and the issuer’s representations about it. If the security is offered as part of a contingency offering, the broker-dealer’s reasonable investigation must include a review of the terms of the contingency, including any agreement and disclosure by the issuer regarding the contingency.

III. Requirements Concerning Manner of Handling Investor Funds

Securities Exchange Act Rule 15c2-4 requires that upon receiving money or other consideration from an investor in a contingency offering, a broker-dealer must promptly:

• deposit those funds into “a separate bank account” for which the broker-dealer is the account holder and is designated as agent or trustee “for the persons who have the beneficial interests therein”; or
• transmit those funds to a bank that has agreed in writing to act as the escrow agent for the offering.

The manner in which a broker-dealer must handle investor funds generally will be determined by two factors. First, pursuant to SEA Rule 15c3-1, only a broker-dealer that maintains at least $250,000 in net capital is allowed to carry customer accounts and receive or hold funds or securities for those persons. Therefore, while not a requirement of SEA Rule 15c2-4, a broker-dealer that maintains less than 250,000 in net capital and deposits investors’ funds into a separate bank account rather than transmitting those funds to an independent bank escrow agent would violate SEA Rule 15c3-1. Second, when a participating broker-dealer is an affiliate of the issuer, investors’ funds must be transmitted to an independent bank escrow agent.

1. Escrow Agreements

In contingent offerings that require an escrow agent, the escrow agreement must be executed with a bank that is unaffiliated with the broker-dealer and the issuer. The escrow account should be established before the broker-dealer receives any investor funds. The escrow account may not be controlled by the issuer, the broker-dealer or an attorney. As a general matter, the escrow agent must be a financial institution that meets the definition of a “bank” under SEA Section 3(a)(6), although the SEC staff has provided no-action relief to permit certain other entities to act as escrow agents.

1. Prompt Transmittal of Funds

SEA Rule 15c2-4(b) requires that a broker-dealer promptly transmit funds to either an escrow agent or a separate bank account. SEC staff has interpreted “promptly” to mean by noon of the next business day. Failure to promptly transmit funds to either the escrow agent or a separate bank account has resulted in sanctions. However, in certain offerings, such as direct participation programs that require suitability determinations by the issuer, the SEC staff has provided procedural guidance under which a broker-dealer can still comply with the “promptly” component of SEA Rule 15c2-4 even if the funds are not transmitted by noon the next business day after they are received.

A broker-dealer’s responsibility does not end when it promptly transmits investor funds to an escrow agent or separate bank account. A broker-dealer must also promptly refund investors’ funds if the contingency is not met.

1. Disbursal to the Issuer

Broker-dealers must segregate investor funds they receive at least until the contingency is met.

It is important to keep in mind that the private security offerings that are not offered through a broker/dealer are subject to many of the core requirements discussed in this post.

Please keep in mind that the above summary is being provided for educational purposes only. It is not designed to be complete in all material respects. If you have any question relative to the contents of this post, you should contact a qualified professional.

Newbridge Securities Corporation (CRD #104065, Boca Raton, Florida) and Bruce Howard Jordan (CRD #1223556, Boca Raton, Florida):

Recently, FINRA announced that a Letter of Acceptance, Waiver and Consent (AWC) was issued in which the Newbridge Securities Corporation was censured and fined $30,000 and Mr. Jordan was fined $5,000 and suspended from association with any FINRA member in any principal capacity for one month.

Without admitting or denying the findings, the firm and Jordan consented to the sanctions and to the entry of findings that the firm failed to comply with escrow requirements, the firm’s supervisory system was not reasonably designed and the firm and Jordan failed to enforce the firm’s written procedures governing contingency offerings. The findings stated that the firm acted as the placement agent for a contingency offering on behalf of an issuer. The firm’s written procedures specified that in contingency offerings, the firm would use a bank that had agreed in writing to hold all such funds in escrow and assigned specific responsibility to Jordan, the managing director of investment banking. However, for one offering, the firm and Jordan failed to deposit investor funds with a bank. Instead, the offering utilized a law firm as the escrow agent. Moreover, the firm and Jordan failed to use the standard escrow agreement required as specified in the firm’s procedures. The findings also stated that the firm improperly counted a non-bona fide investment toward the minimum contingency calculation, the firm’s supervisory system was not reasonably designed and the firm and Jordan failed to enforce relevant procedures. Without the non-bona fide investment, the minimum contingency would not have been met. The firm’s written procedures for contingency offerings specified that only bona fide investments should be counted toward an offering minimum but provided no guidance as to what constituted a bona fide investment. Jordan was assigned responsibility to determine whether an investment was bona fide. The firm, acting through Jordan, failed to review the investment to determine whether it should be considered a bona fide investment. Instead, after receiving the investment, the firm and Jordan declared the offering sold and released funds from escrow. As a result, the firm willfully violated Rule 10b-9 of the Securities Exchange Act and FINRA Rule 2010. The findings also included that the firm failed to return investor funds when minimum contingency was not met by the termination date in the offering documents, the firm’s supervisory system was not reasonably designed and the firm and Jordan failed to enforce the firm’s relevant procedures. In a second contingency offering, the issuer offering memorandum required a certain amount of the securities to be sold by a particular date for the offering to close. The offering memorandum also provided that if the minimum was not subscribed by the termination date, then all funds would be returned to investors and all subscription documents deemed rejected. The firm’s written procedures for contingency offerings specified that if the minimum contingency is not sold within the deadline specified by the offering documents, all funds should be promptly returned to investors. The firm’s written procedures failed to address circumstances where an issuer sought to extend the deadline for the minimum contingency through written confirmation by the investors, nor did it provide any guidance for the process of obtaining such written confirmation. The firm’s written procedures assigned specific responsibility for determining whether the minimum contingency had been met to Jordan. The minimum for the second offering was not met by the closing date, and the firm and the issuer agreed to extend the closing date. The firm and Jordan, however, did not send written reconfirmation offers to the investors disclosing the extension of the offering period prior to the original closing date. Instead, investors were provided with a supplement notifying them of the extension and instructing them to contact the firm if they did not wish to participate in the offering. No investor funds were returned, and no investors confirmed in writing their decision to continue their investments. The minimum was subsequently met by the extended closing date, and the firm, acting through Jordan, released the funds from escrow to the issuer of the second offering. Therefore, the firm willfully violated Rule 10b-9 of the Securities Exchange Act and FINRA Rule 2010. The suspension was in effect from December 6, 2021, through January 5, 2022. (FINRA Case #2019063371901).

For quite sometime, we have attempted to bring to the attention of the investing public, especially seniors, the pitfalls that an investor is exposed to when investing in precious metals of all kinds. The primary area of abuse that retail investors is exposed relates to the sale and purchase of gold and silver bullion and coins. This post relates to a case involving bullion. On September 25, 2020, the Commodity Futures Trading Commission (CFTC) and 30 state regulators that are members of the North American Securities Administrators Association filed a joint civil enforcement action against two precious metals dealers and their companies for perpetrating an alleged $185 million fraudulent scheme.

The complaint charges TMTE, Inc., d/b/a Metals.com, Chase Metals, LLC., Chase Metals, Inc. (collectively Metals.com) Barrick Capital, Inc. and its principals, Lucas Asher a/k/a Lucas Thomas Erb a/k/a Luke Asher and Simon Batashvilli with an ongoing nationwide fraud. According to the complaint, from at least September 1, 2017 to the date of the filing of the action, the defendants fraudulently solicited and received over $185 million in customer funds, including more than $140 million in retirement savings, from at least 1,600 persons throughout the United States for the purpose of purchasing precious metals bullion.

One of the largest areas of abuses in retail precious metals transactions relate to the markup on purchases and the markdown on sales (the commission) of bullion and coins. In the Metals.com case, it is alleged that the prices charged customers had no bearing on the true value of the purchases. It is alleged by the government that the markup charged to the investor bore no relationship to the then prevailing market price. Metals.com charged markups of anywhere between 100 percent to more than 300 percent. Just to put this into perspective, this means that in order for the investor to approach breakeven an investor would have to make back the full amount of the markup and enough to pay the markdown on the sale. It is no wonder that nearly every customer lost the vast majority of their funds with the defendants.

According to the complaint, what makes this situation even more egregious is that to perpetuate their fraud, when questioned by a customer about the value of the precious metals they purchased, the defendants falsely claimed that the precious metals bullion was rare and carried a premium far above the base melt value of the metal, which was not true.

What is the melt value of metal? It really does not have anything to do with the value of quality bullion. It has a lot to do with the value of coins, which is another bad story. The melt value of bullion or coins is basically what the metal of the bullion or coin is worth if you were to melt the bullion or coin down. Even if you have a totally ruined coin, it’s metal content is still worth something, especially if it is made out of precious rare metals like gold, silver and platinum.

If you are contemplating investing in bullion, you can due some level of due diligence yourself. By going to Kitco.com you can research the spot value of the metal you are looking to purchase or sell. The difference between the spot price and what you are quoted by the broker would be the markup. The spot price is of gold or silver is the current price in the precious metals marketplace at which a raw ounce of gold or silver can be bought or sold for immediate delivery. The spot price fluctuates constantly.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Online banking is the way of the future, and many senior citizens are following suit. However, our elderly loved ones face a higher risk of suffering online scams. If your mother, father or another relative who is a senior citizen has made the jump to online banking, this is how you can help them avoid fraud.

Why seniors are at risk

Anyone can fall victim to fraud. Senior citizens, however, are particularly vulnerable. They make popular targets for criminals, scammers and unscrupulous individuals who would take advantage of them via online banking. Why?

Seniors have spent a lifetime accumulating assets and property. This is tempting to anyone looking to line their own pockets. What’s more, many seniors do not have the technological savvy to recognize common online scams such as phishing. Old age is also when many people begin to experience intellectual decline or physical disability, which leaves them less capable of defending themselves.

How to protect seniors from scams

Fortunately, there are steps that you can take to help your loved one avoid online banking scams. These include:

• Educate your loved one about internet safety
• Install security software on their computer and other devices
• Communicate regularly about their finances
• Keep watch for any suspicious transactions
• Help them to change their passwords regularly
• Consider seeking a guardianship or conservatorship if they have lost their capacity

Granted, these precautionary measures cannot prevent every instance of fraud. If your elderly parent or relative fell prey to internet bank fraud, report the scam to authorities immediately. Consider your legal options, as you may need to file a lawsuit against the perpetrator to recover compensation for your loved one’s damages.

What is a fiduciary duty?

You may have heard the term fiduciary duty used in many different contexts. Many people who act in a role where other people entrust them with their assets or funds must abide by a fiduciary duty. Examples include trustees of a trust, the personal representative of a probated estate and officers of a corporation. All of these people owe a duty of loyalty and care to the people or entities they represent. They are supposed to act in a reasonable manner on behalf of the entity, treating the assets the way the owner would treat them.

Duties depend on the type of account

When looking at your stockbroker’s fiduciary duty, you must look at the type of account they are handling for you. The three main types of accounts include:

Discretionary – A discretionary account gives your account executive, or broker, broad fiduciary powers. Although he or she must keep you apprised of market changes and transactions, along with the risks and benefits involved, they do not need your authorization to take action. They must manage the account responsibly and according to the objectives you agreed upon.

Non-discretionary – A non-discretionary account allows the customer to make decisions about purchases and sales. The broker must act in the customer’s interest up to closing the transaction by making sound and honest recommendations, relay any risks involved, comply with the customer’s orders in a timely way and not engage in any self-dealing or misrepresentation. Once the deal is closed, the broker no longer owes a duty to the customer.

Hybrid – With a hybrid account, the account executive takes control of a non-discretionary account. When they do this, they must apply the same fiduciary duty as if the account had started out as discretionary.

Stockbroker misconduct can take many different forms resulting in misrepresentation and fraud. Some actions may even rise to the level of a criminal offense. If you suspect your stockbroker is not abiding by his or her fiduciary duties to you, consult with a legal professional to discuss your options.

Whether you are considering purchasing gold or you already own a significant amount, you must remain vigilant to financial scams. Here, we will examine some of the most common gold-related scams currently making the rounds.

Scams to watch out for this year

Every industry has its share of frauds, and gold is no different. These are some scams currently circulating in the gold industry, plus how you can avoid them:

• Misleading claims: Overstating the value of gold, making hyperbolic claims about investment returns and overstating scarcity has become common. Fraudsters do this to inflate value and line their own pockets. To avoid falling for a misleading claim, do plenty of research before you decide to invest.
• “Empty vault” schemes: In a so-called empty vault scheme, a fraudulent dealer that does not have access to a secure vault tricks an investor into paying for storage anyways. Before paying for storage services, determine for certain whether the dealer has access to a secure storage facility.
• Phishing: Garden-variety phishing scams are always prevalent. With the gold market on the rise, phishers are increasingly targeting potential investors in gold and other rare metals. To prevent phishing, do not click the links in suspicious-looking emails and beware of giving out your personal information online.

Scams may be on the rise, but this should not necessarily discourage you from purchasing gold. Research every transaction carefully so that you make wise purchases from reputable sources. And if you suspect a scam, report it to the authorities immediately.

The rewards are small for a big risk

People who engage in insider trading often suffer from a type of tunnel vision. When a broker makes trades in the hundreds of millions of dollars per year, an insider trade involving a few thousand dollars doesn’t seem like a big deal. Years ago, lifestyle guru Martha Stewart was convicted of insider trading. The illegal trading amounted to $45,000. Peanuts for someone with a net worth in the millions. Nonetheless, she still had to pay significant fines and serve a prison term.

Holding parties accountable

It doesn’t matter whether insider trading involves pennies or jaw-dropping amounts of money. It’s against the law and hurts investors who operate above board. The Securities and Exchange Commission (SEC) tends to focus on high profile cases. While insider trading can hurt the bottom line of large companies, it’s often individual investors who place their trust in a broker who suffer the greatest amount of harm.

You don’t have to wait for the SEC to act if you’ve experienced a significant financial loss as the result of insider trading. A skilled professional with experience handling matters involving broker misconduct and securities litigation can help you explore your legal options.

The accessibility of precious metals, however, makes them an easy vessel for would-be scammers and fraudulent brokers to take advantage of unseasoned investors. In many cases, alertness and skepticism can mean the difference between making a solid investment and making a stolen investment.

If a prospective broker attempts to entice you into buying gold, silver, platinum or palladium with any of the following tactics, consider your next moves carefully.

“You can trust me.”

Reputable brokers work for reputable companies, and a company’s reputation should be easy enough to check. A shady dealer may try to convince you that their professional background or association with a specific firm, industry or organization warrants your unfailing trust alone. If a dealer offers only special credentials without other justification, their reasons for taking your investment likely are not altruistic.

“I guarantee good returns.”

The market is a living being, which means that it fluctuates almost constantly. No dealer can guarantee double or triple your initial deposit without a crystal ball.

In the same line of thinking, a broker cannot make comparisons to returns on your current investments unless you provide them with that information. Keep an eye out for “too good to be true” situations that offer returns above and beyond your present investments.

“If it worked for them, it will work for you.”

Peer pressure continues to exist outside of after-school programs. By pointing to the established success of others, a dealer may try to convince you that your investment with them will be foolproof. However, without the crystal ball, they are offering you an empty promise with no way of knowing how the market will react.

“I’ll scratch your back if you scratch mine.”

On occasion, you will encounter a dealer who offers to tie your success together in order to set your mind at ease. Reducing dealer fees may be a ploy to get you on the hook to do them a favor.

“It’s only available for a limited time/in limited quantities.”

False windows and supply create false senses of urgency. That false sense of urgency can cause you to buy before you have time to research the dealer and the investment properly. Investments, no matter how small, should be considered carefully and thoughtfully. If you miss out on this particular investment, another will present itself in time.

If you suspect that your precious metals investment has gone awry because of a fraudulent dealer, discuss your concerns with an experienced commodities and precious metals attorney.

That said, it’s the job of your broker to make trades. Depending on the type of investments you have, making a high-volume of trades may even be advantageous. However, you should still take note of signs of churning. Recognizing the warning signs can let you know whether you’re being taken advantage of or whether your broker is operating above board.

Times when you should be skeptical

Take particular note if:

• You’ve noticed your broker making more trades than is normal
• Your broker telling you to buy a large number of securities suddenly
• Your broker refusing to explain the strategy behind their trades

To prevail on a churning claim, you must prove that your broker had control of your investments. You must also show that the number of trades was excessive. Keep in mind that what be excessive in one context may be the standard way of doing business in another.

If you believe your broker is engaging in churning, you have no obligation to continue using the broker’s services. If churning has caused you to lose money, you may have legal options. You should discuss your situation with a skilled legal professional.

The final judgment was based upon a unanimous jury verdict which found Willian C. Conway, Jr. and Steven Schrag, among other defendants, guilty of fraud in the inducement, negligent misrepresentation in the inducement and conspiracy to defraud. The judgment was predicated upon an alleged gold (precious metals scam) which originated in Africa.

Contact Us: With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

As with any type of business transaction that you are contemplating, it is important for you to read and understand fully all of the terms and conditions of any type of margin or, for that matter, loan agreement which you are considering. The explanation of the account executive of the terms, risks and rewards of what is contained in the margin agreement is superseded by the document itself. Moreover, the agreement will refer the reader to other rules and regulations that are incorporate, by reference, into the document. These rules and regulations are of equal force with the terms of the margin agreement.

It is for these reasons that a customer is required to sign the margin agreement to open a margin account. The agreement may be part of your account opening agreement or may be a separate agreement. The margin agreement states that you must abide by the rules of the Federal Reserve Board, the New York Stock Exchange, the National Association of Securities Dealers, Inc., and the firm where you have set up your margin account.

As with most loans, the margin agreement explains the terms and conditions of the margin account. The agreement describes how the interest on the loan is calculated, how you are responsible for repaying the loan, and how the securities you purchase serve as collateral for the loan. Carefully review the agreement to determine what notice, if any, your firm must give you before selling your securities to collect the money you have borrowed.

Please keep in mind that this information is being provided for educational purposes. It is not designed to be complete in all material respects. If you have any questions relative to the contents of this post you should contact a qualified professional.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation, commercial litigation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks, brokerage firms or U.S. companies. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage, precious metal firms and other types of business activities.

Margin is borrowing money from your broker to buy a security and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more securities without fully paying for it. The amount owed to the broker is called the debit balance. Through the use of leverage, investors attempt to magnify gains on actual cash or collateral deposited into their accounts. But at the same time, the use oft margin exposes investors to the potential for higher losses. Another reason for borrowing money from brokers is the feature involving a no-repayment-date loan. This feature is generally not available through other types of lending institutions, including banks. The no-repayment feature, although very attractive, can be fraught with danger. The investor should be made aware that if the value of securities on deposit with the broker declines substantially, the broker will require additional funds or collateral to protect the loan.

There are 2 primary types of margin requirements: initial and maintenance.

Initial/Reg T requirements:

An initial margin requirement is the amount of funds required to satisfy a purchase or short sale of a security in a margin account. The initial margin requirement is currently 50% of the purchase price for most securities, and it is known as the Reg T or the Fed requirement, which is set by the Federal Reserve Board. In addition, most firms have minimum requirements that must be met when initially opening a margin position, which may vary from firm to firm.

Maintenance requirements:

Ongoing margin requirements after the purchase is complete are known as maintenance requirements, which require that you maintain a certain level of equity in your margin account. Maintenance requirements are set by the NYSE, FINRA, and/or the brokerage firm.

Understand How Margin Works:

Let’s say you buy a stock for $50 and the price of the stock rises to $75. If you bought the stock in a cash account and paid for it in full, you’ll earn a 50 percent return on your investment. But if you bought the stock on margin – paying $25 in cash and borrowing $25 from your broker – you’ll earn a 100 percent return on the money you invested. Of course, you’ll still owe your firm $25 plus interest.

The downside to using margin is that if the stock price decreases, substantial losses can mount quickly. For example, let’s say the stock you bought for $50 falls to $25. If you fully paid for the stock, you’ll lose 50 percent of your money. But if you bought on margin, you’ll lose 100 percent, and you still must come up with the interest you owe on the loan.

In volatile markets, investors who put up an initial margin payment for a stock may, from time to time, be required to provide additional cash if the price of the stock falls. Some investors have been shocked to find out that the brokerage firm has the right to sell their securities that were bought on margin – without any notification and potentially at a substantial loss to the investor. If your broker sells your stock after the price has plummeted, then you’ve lost out on the chance to recoup your losses if the market bounces back.

Who Should Use Margin:

Investors who generally use margin are those who are aggressive and who fully understand the risks as well as rewards in using leverage. Conservative investors for the most part shy away from the use of margin because of the risks associated with its use. Some of these risks are set forth below.

Risks:

Margin accounts can be very risky and they are not suitable for everyone. Before opening a margin account, you should fully understand that:

• You can lose more money than you have invested;
• You may have to deposit additional cash or securities in your account on short notice to cover market losses;
• You may be forced to sell some or all of your securities when falling stock prices reduce the value of your securities; and
• Your brokerage firm may sell some or all of your securities without consulting you to pay off the loan it made to you.

You can protect yourself by knowing how a margin account works and what happens if the price of the stock purchased on margin declines. Know that your firm charges you interest for borrowing money and how that will affect the total return on your investments. Be sure to ask your broker whether it makes sense for you to trade on margin in light of your financial resources, investment objectives, and tolerance for risk. Importantly, read the margin agreement and make sure that you understand all of its terms.

Please keep in mind that this information is being provided for educational purposes. It is not designed to be complete in all material respects. If you have any questions relative to the contents of this post you should contact a qualified professional.

Contact Us:

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation, commercial litigation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks, brokerage firms or U.S. companies. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage, precious metal firms and other types of business activities.

For purposes of this discussion, we will assume that the elements set forth above to allege a civil conspiracy exist. A series of Florida cases have found personal jurisdiction over non-resident defendants engaged in conspiracies that include tortious or statutorily-prohibited actions as against Florida residents. For example, telephonic, electronic or written communications into Florida, by a non-resident, may form the basis for personal jurisdiction if the alleged cause of action arises from the communications. In addressing allegations that a non-resident defendant committed a tort in Florida though acts and communications directed into the state from outside of Florida, the appropriate inquiry is whether the tort as alleged occurred in Florida and not whether the alleged tort actually occurred.

As can be seen from the above discussion, it is important to examine all of the facts underlying the cause of action alleged as to each defendant. When dealing with a non-resident defendant, it is especially important to allege, in the complaint, all of the specific acts, of the non-resident defendant, that were committed in furtherance of the conspiracy so that the court may properly determine the issue of jurisdiction.

Contact Us: With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation, commercial litigation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks, brokerage firms or U.S. companies. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage, precious metal firms and other types of business activities.

In certain circumstances, the answer to this question is easy to discern. One need look no further than the provisions of Florida Statute § 48.193. It is for that reason that we have set forth the provisions of the statue in its current entirety below. The provisions of the statute are clear. If a non-resident does certain enumerated things in Florida, Florida courts have jurisdiction to hear your claim. However, many times, because of the unique facts of your case, it might not be that easy to determine whether Florida is the correct jurisdiction. As a result of this many non-resident defendants contest the issue of jurisdiction, the cases that deal with the provisions and legal interpretations of the statute are voluminous. Thus, if you want to make a claim against a non-resident, the specific facts of your case should be analyzed by a qualified professional so that the pros and cons of making a claim in Florida can be discussed with you so that you can make a informed decision as to where you might want to bring your action.

48.193 Acts subjecting person to jurisdiction of courts of state.—
(1)(a) A person, whether or not a citizen or resident of this state, who personally or through an agent does any of the acts enumerated in this subsection thereby submits himself or herself and, if he or she is a natural person, his or her personal representative to the jurisdiction of the courts of this state for any cause of action arising from any of the following acts:
1. Operating, conducting, engaging in, or carrying on a business or business venture in this state or having an office or agency in this state.
2. Committing a tortious act within this state.
3. Owning, using, possessing, or holding a mortgage or other lien on any real property within this state.
4. Contracting to insure a person, property, or risk located within this state at the time of contracting.
5. With respect to a proceeding for alimony, child support, or division of property in connection with an action to dissolve a marriage or with respect to an independent action for support of dependents, maintaining a matrimonial domicile in this state at the time of the commencement of this action or, if the defendant resided in this state preceding the commencement of the action, whether cohabiting during that time or not. This paragraph does not change the residency requirement for filing an action for dissolution of marriage.
6. Causing injury to persons or property within this state arising out of an act or omission by the defendant outside this state, if, at or about the time of the injury, either:
a. The defendant was engaged in solicitation or service activities within this state; or
b. Products, materials, or things processed, serviced, or manufactured by the defendant anywhere were used or consumed within this state in the ordinary course of commerce, trade, or use.
7. Breaching a contract in this state by failing to perform acts required by the contract to be performed in this state.
8. With respect to a proceeding for paternity, engaging in the act of sexual intercourse within this state with respect to which a child may have been conceived.
9. Entering into a contract that complies with s. 685.102.
(b) Notwithstanding any other provision of this subsection, an order issued, or a penalty or fine imposed, by an agency of another state is not enforceable against any person or entity incorporated or having its principal place of business in this state if the other state does not provide a mandatory right of review of the agency decision in a state court of competent jurisdiction.
(2) A defendant who is engaged in substantial and not isolated activity within this state, whether such activity is wholly interstate, intrastate, or otherwise, is subject to the jurisdiction of the courts of this state, whether or not the claim arises from that activity.
(3) Service of process upon any person who is subject to the jurisdiction of the courts of this state as provided in this section may be made by personally serving the process upon the defendant outside this state, as provided in s. 48.194. The service shall have the same effect as if it had been personally served within this state.
(4) If a defendant in his or her pleadings demands affirmative relief on causes of action unrelated to the transaction forming the basis of the plaintiff’s claim, the defendant shall thereafter in that action be subject to the jurisdiction of the court for any cause of action, regardless of its basis, which the plaintiff may by amendment assert against the defendant.

Contact Us:
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation, commercial litigation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks, brokerage firms or U.S. companies. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage, precious metal firms and other types of business activities.

The Florida Uniform Fraudulent Transfer Act (“FUFTA”) is contained in Florida Statute §§ 726.101 – 201 FUFTA provides creditors (judgment holders) with various forms of relief to avoid a debtor’s (defendant’s) fraudulent transfer of assets or funds. A creditor (a plaintiff) may avoid a debtor’s transfer where the creditor shows that the transfer was made with actual intent to hinder, delay, or defraud. To that end, FUFTA provides a non-exhaustive litany of factors – referred to as “badges of fraud” – to consider when determining whether a debtor’s transfer is fraudulent as to the creditor:

1. The transfer or obligation was to an insider.
2. The debtor retained possession or control of the property transferred after the transfer.
3. The transfer or obligation was disclosed or concealed.
4. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit.
5. The transfer was of substantially all of the debtor’s assets.
6. The debtor removed or concealed assets.
7. The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred.
8. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation incurred.
9. . The transfer occurred shortly before or shortly after a substantial debt was incurred.
10. The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

The court may additionally consider any other factor it deems relevant and should look to the totality of the circumstances in determining actual fraud. The existence of badges of fraud creates a prima facie case and raises a rebuttable presumption that the transaction is void.

FUFTA also allows a creditor to avoid a debtor’s transfer that is constructively fraudulent. In order to establish a prima facie case for avoidance based on constructive fraud, the creditor must show that the debtor did not receive reasonable value for the transfer and either (1) the debtor was engaged or was about to engage in a business or transaction for which the debtor’s remaining assets were unreasonably small in relation, (2) the debtor intended to, believed, or reasonably should have believed that it would incur debt beyond what it could pay as the debt became due, or (3) the debtor was insolvent at the time of the transfer.

Please keep in mind that this article is for informational purposes only. It is not designed to be complete in all material respects. Moreover, there may be facts specific to your situation that would have to be considered to determine whether or not a fraudulent transfer has taken place. Thus, if you have any questions relative to this post, please feel free to contact us.

Contact Us:
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation, commercial litigation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks, brokerage firms or U.S. companies. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage, precious metal firms and other types of business activities.