October 21, 2019
featured in today's Securities Industry Commentator:
As veteran industry reporter Oisin Breen observes in the opening to his compelling coverage:
Wealthfront's "move fast and break things" business model broke things, again, forcing the firm to apologize to clients for bungling tax data -- a misstep that could lead to higher tax bills, potential fines and lawyers scratching their heads over liability.
It's the latest in a series of pratfalls made by the firm as a result of its belief in a minimum viable product approach to business. In other words, launch the product then work out the kinks later.
And while financial institutions are becoming more responsive and incorporating more safeguards to protect against elder fraud and manipulation, America's most vulnerable face another, more insidious threat. Increasingly, it's the professionals-the lawyers, insurers and financial advisers that the elderly trust-who are the wolves in sheep's clothing.
In a FINRA Arbitration Statement of Claim filed in May 2019, public customer Claimant Zvinakis, representing himself pro se, alleged that mail from Respondent Schwab was returned to sender after Claimant filed a temporary change of address and mail forwarding request with the U.S. Postal Service.Thereafter, Claimant alleged that Respondent wrongfully restricted his access (pursuant to a Financial Power of Attorney "FPOA") to one of his wife's accounts, thus preventing him from confirm the correct address of record and, as a result, causing $950 in damages. Respondent Schwab denied the allegations and asserted affirmative defenses. The sole FINRA Arbitrator ordered Respondent Schwab to lift all restrictions on the cited account and to provide to Claimant a written confirmation via email and USPS that the FPOA agent can confirm the current address. The Arbitrator denied monetary damages.
There are many times when a stockbroker will swear on a stack of Bibles that he and a customer had a conversation about a given trade, and that the trade was executed with the client's knowing authorization. In response, the customer may insist that the trade was never authorized. As these things go, sometimes the customer is full of crap and exhibiting an immoral case of buyer's remorse at the expense of the stockbroker's good name. Other times, the stockbroker went rogue. Frankly, in such disputes, the customer often has the stockbroker dead to rights. Speaking of dead to rights, did you hear the one about the stockbroker who claimed to have spoken to his customer three and six days after the customer's death -- and, go figure, it all had to do with trades that the stockbroker entered three days after the customer's death.
The SEC voted to propose rule amendments https://www.sec.gov/rules/proposed/2019/ic-33658.pdf to establish an expedited review procedure for applications under the Investment Company Act. As asserted in part in the SEC Release:
- Proposed amendments to rule 0-5 under the Investment Company Act would establish an expedited review procedure for routine applications that are substantially identical to recent precedent.
- Expedited review would be available if the application is substantially identical to two other applications for which an order granting the relief has been issued within two years of the date of the application's initial filing.
- Notice for an application filed under expedited review would be issued no later than 45 days from the date of filing unless applicants are not qualified under the rules or if the staff believes comments are necessary.
- Proposed amendments to rule 0-5 under the Act would deem an application outside of expedited review withdrawn when the applicant does not respond to comments from SEC staff within 120 days.
- Proposed new rule 17 CFR 202.13 would establish an internal timeframe for staff to take action on applications outside of expedited review within 90 days of the initial filing and amendments thereto.
- The proposal also announces plans for staff of the Division of Investment Management to publicly disseminate staff comments on applications, and responses to those comments, no later than 120 days after the final disposition of an application, similar to the current policy of Division of Investment Management's Disclosure office in reviewing registration statement filings.