On March 13, 2025, the Texas State Securities Board (TSSB) adopted Rule §115.24, formally incorporating the SEC’s Regulation Best Interest into Texas law. The rule applies to broker-dealers and their registered representatives and also adopts related fair practice and ethical standards issued by the SEC, FINRA, the CFTC, and other approved self-regulatory organizations. Alongside this change, Texas strengthened dealer recordkeeping requirements to ensure firms can verify compliance.

The takeaway is simple but powerful: brokers must put investors first.

This week, FINRA announced sanctions against Keith M. D’Agostino, a former broker at Aegis Capital Corp., fining him $25,000 and suspending him for two years for allegedly steering retirees into high-risk penny stocks that were wholly inconsistent with their stated investment goals. According to regulators, the misconduct resulted in more than $1.8 million in losses across 10 customer accounts. FINRA Disciplinary Actions Online | FINRA.org

When “Advice” Becomes Exploitation

1. Adoption of FINRA MQP and NASAA EVEP: The Texas State Securities Board will begin recognizing the FINRA Minimum Qualification Program (MQP) and the NASAA Exam Vendor Education Program (EVEP) for examination requirements. This will help streamline regulatory processes for broker-dealers and investment advisers operating in Texas.
2. FINRA RIPP and Residential Supervisory Locations (RSLs): A new amendment to the Board’s rules will allow registered Texas dealers participating in FINRA’s Remote Inspections Pilot Program (RIPP) to comply with Texas supervision rules by conducting internal inspections in accordance with FINRA’s rules. Additionally, rules related to residential supervisory locations (RSLs) for dealers have been updated to align with FINRA standards.

If you’re experiencing outsized losses, your advisor may have failed to recommend suitable investments to prepare you for this downturn. Assess your portfolio for some common investment missteps. A good advisor would have discussed with you your risk tolerance, the potential for a downturn, and the right asset allocation to meet your needs and investment objectives. If your portfolio allocation doesn’t reflect the fruits of that discussion, you may need the help of an investment fraud attorney. In short, how much are you willing to lose, both in terms of percent decline and in real dollars? Know before you invest.

Depending on the investor’s personal suitability and risk tolerance profile, an asset allocation that considers and adjusts for downturn risk may include higher diversity to shield from an individual company’s risk of bankruptcy. Within this diversification, a recession-ready portfolio may feature more value, rather than growth, stocks. A diversified portfolio may also include some international investments to shield against domestic risk from Federal Reserve actions.

Morgan Stanley is the latest firm to be slapped with a hefty fine for the use of unapproved personal devices, according to a recent report. In its second-quarter 2022 earnings statement, Morgan Stanley disclosed a $200 million fine “related to a specific regulatory matter concerning the use of unapproved personal devices and the firm’s record-keeping requirements.” This is in response to conversations the firm has had with the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC).

Morgan Stanley isn’t alone. Since the COVID-19 pandemic has moved more investment professionals to out-of-office settings, the use of personal devices has proliferated. As a result, major investment firms like JPMorgan, Citigroup, Deutsche Bank AG, and HBSC Holdings Plc have all reported a range of related concerns such as fines, regulatory scrutiny, or other internal actions because of regulators’ crackdown on personal device use.

Brokers who engage in fraud or other types of illegal activity with client accounts need to shelter their communications with clients from the firm. One warning sign that a broker may be engaging in investment fraud is that the broker communicates with you through their personal email account about your investments or other potential investments, and not through an email account that is supervised by their employer

In most instances, brokers are required to use their email associated with the firm. Similarly, many firms prohibit brokers from texting with their clients, as it can be more difficult for a firm to police those private text communications. Communications with customers are also frequently reviewed by FINRA and other regulators. Thus, for brokers interested in selling products to clients outside of the firm’s offerings (selling away) or, even worse, trying to commit fraud against a client, using a work email only risks the broker’s misconduct is discovered by their firm.

This is exactly what is alleged to have occurred at UBS Wealth Management USA. According to a recent report, one of the firm’s former brokers in Waco, Texas, stole more than $17 million from customers over a period of more than 25 years. Evidently, the broker was able to “fraudulently convince” more than 20 clients to invest in a “sham” investment that he and a friend from college created. To induce clients to make this investment—which was not included among UBS’s offered products—the broker promised them between 4% and 8% interest, which would compound quarterly. And to keep the fraud going, he and his partner would send out fake account statements purporting to show that the accounts were increasing in value, as promised.

However, in September 2021, the fraudulent investment scheme started to unravel. At this point, The broker left UBS and began working for another investment firm. There are allegations that he continued to push the same fraudulent investment at his new firm.

Cryptocurrency was initially met with skeptical eyes across the finance community; however, in more recent years, many notable investors have gotten onboard with the crypto craze. Investors considering adding cryptocurrency to their portfolios should familiarize themselves with cryptocurrency, its risks, and what can be done in the event of crypto fraud or crypto hacking.

What Are Cryptocurrencies?

Cryptocurrency is a digital currency that is backed by a complex algorithm making it nearly impossible to counterfeit. However, cryptocurrency is not tied to any financial resource, which is why so many were skeptical of the asset class initially.

How Can Investors Purchase Cryptocurrency?

At first, the only way to buy cryptocurrency was by creating a digital “wallet” and adding the funds through one of only a few cryptocurrency exchanges. However, over time, more and more reputable brokerage firms began offering crypto assets as an option for investors. Thus, today, you can buy Bitcoin, Ethereum, Dogecoin and many other cryptocurrencies through Robinhood, Fidelity, Ameritrade, Charles Schwab and dozens of other firms.

Investor Concerns Over Cryptocurrency

Despite the fact that cryptocurrency’s popularity has exploded, little has been done to address the unique risks these assets present to investors. Perhaps the most known risk of crypto investing is volatility. Cryptocurrencies are extremely volatile. It is not unheard of for Bitcoin to move more than ten percent in a single day. Thus, investment advisors should only recommend crypto assets to investors who are looking to increase their portfolio’s beta value or total exposure to volatility.

Additionally, there have been recent reports of crypto hacking where cybercriminals hack into a crypto exchange and essentially steal accountholders’ cryptocurrency. Just last month, Crypto.com admitted that a hacker was able to bilk investors of $30 million in crypto assets. In this case, the company made it right with investors by reimbursing them for their losses. However, this isn’t always going to be the case.

Crypto fraud raises unique concerns for investors. Because cryptocurrency is not regulated by the federal government, there are no standard procedures victims can go through to recover their funds. Thus, those who were the victim of a crypto hack will likely need to reach out to a Texas securities fraud lawyer for assistance.

Have You Been the Victim of a Cryptocurrency Scam?

If you recently lost money on a cryptocurrency investment, either due to a broker’s recommendation or hacking event, reach out to the dedicated Texas cryptocurrency lawyers at the Forman Law Firm, P.C. At the Forman Law Firm, we represent aggrieved investors who lost money due to no fault of their own, helping them recover their assets and hold those responsible for their losses accountable. To learn more, and to schedule a free consultation, reach out to the Forman Law Firm, P.C. at 512-306-8188 today. You can also reach us through our online contact form.

In this Guest Blog Piece, we hear from Edmond (Ed) Martin of Sage Investigations, LLC in Austin, Texas.  Ed brings some unique experience and perspective to “Ponzi Schemes” a topic that has been around for a while and one on which we have often posted (see, “Ponzi Schemes Recommended By Stockbroker—How Can Firms Miss Them”), but one that is likely to experience a resurgence at the end of the recent bull market and the recession possibly brought on as with the Coronavirus Correction as more and more schemes are revealed as the proverbial house-of-cards comes tumbling down.    Ed is a Certified Fraud Investigator, and gained substantial experience working as a Special Agent for the U. S. Treasury and Internal Revenue Service, Department of Justice, Texas State Securities Board, and other government agency types that you never really want to hear from unannounced–you would always rather call them as a victim of a scam.  Ed has investigated all sorts of financial fraud, with a particular emphasis on Ponzi Schemes, and has told his stories on a number of television programs.    See his CV here.  We invite him here to share his perspective on two of the more notorious Ponzi schemes—Madoff and Russell Erxleben, and to highlight a few of the early warning signs for investors.

Beware of Financial Fraud During Troubled Times.

Who would’a thought that the title and lyrics from the English punk rock band “The Clash” from 1981 might aptly describe the retail investor’s conundrum given the Coronavirus meltdown in the equity markets?  As a retail investor with a sizeable amount of your life’s savings in the market, “should you stay or should you go…?”