Enjoy complimentary access to top ideas and insights — selected by our editors.
B. Riley Financial, JPMorgan and Oppenheimer & Co. were all in the Financial Industry Regulatory Authority’s crosshairs in April, leaving some unscathed and others a little worse for wear.
FINRA has weathered numerous legal storms over the last few years but has seen an increase of court battles in recent months as the Trump administration continues along its path of deregulation.
An annual report from the Washington, D.C.-based law firm Eversheds Sutherland released in March found that FINRA-issued disciplinary actions jumped by 22% to 552 in 2024, signaling the first increase from the self-regulator in roughly nine years. While filings increased, fines collected by FINRA actually decreased by 35% to $59 million across the same period.
These findings come in the wake of pressure from politicians like Sen. Elizabeth Warren, D-Mass., who has pushed back against FINRA claims that lower pre-2024 enforcement numbers mean that its efforts to crack down on bad actors succeeded. 2023 saw a record low for enforcement action from the regulator.
Warren had also called into question the FINRA360 program — FINRA’s attempt to expedite proceedings by merging two enforcement divisions.
“Any suggestion that FINRA360 had the effect of reducing the number of enforcement actions is just dead wrong,” FINRA spokesperson Ray Pellecchia told Bloomberg, adding that such allegations would have more credibility if there were less industry pushback.
READ MORE: Report: FINRA ‘highly likely’ to survive legal assaults
Dive into the top legal cases impacting the wealth management industry below.
B. Riley discloses FINRA probe of wealth management division
The Los Angeles, California-based B. Riley Financial is weathering a new look into its wealth management business from FINRA.
B. Riley Wealth Management reported the FINRA “cause examination” in a Securities and Exchange Commission filing submitted in April. These exams tend to stem from consumer complaints or regulatory tips and could end with sanctions or fines, depending on the findings.
The firm has navigated many ups and downs over the last three years, ranging from the acquisition of Florida-based brokerage National Securities to the sale of parts of its wealth management business to St. Louis-based Stifel Financial and even an expected delinquency notification letter from Nasdaq on April 3.
READ MORE: B. Riley discloses FINRA exam of its wealth business
Oppenheimer dodges Ponzi scheme effort from aggrieved investors
Judges with the Ninth Circuit Court of Appeals ruled that alleged victims of a Ponzi scheme orchestrated by former Oppenheimer & Co. broker John J. Woods could not go after Oppenheimer in a FINRA arbitration forum.
Past cases tied to Woods’ 13-year scheme, which landed him an eight-year prison sentence in February 2024 and a sum total of $33.6 million in restitution for his victims, have led Oppenheimer to pay out more than $50 million to affected investors. The figure includes orders from a May 2023 FINRA arbitration panel and September 2022 panel that required the firm to pay out roughly $14 million to five victims and another $36.7 million to a separate eight different investors.
But according to the court’s ruling, plaintiffs in this latest effort were unable to provide definitive proof of direct ties to Woods, only to his associate Michael J. Mooney.
READ MORE: Court rejects Ponzi scheme arbitration bid in Oppenheimer case
MichaelVi Adobe; Wolterke/Adobe
LPL drops its data-breach defamation suit against Ameriprise
LPL Financial has decided to drop its defamation suit against Ameriprise over data breach notifications, but is leaving the door open to FINRA arbitration.
The accusations from LPL involve claims that Ameriprise sent data breach notices to the clients of roughly 30 former advisors that moved to LPL, thereby tarnishing the firm’s public image. LPL and Ameriprise jointly decided to dismiss the case with prejudice in federal court for the Southern District of California, but have yet to make a similar decision as to arguing before a Financial Industry Regulatory Authority arbitration panel.
An Ameriprise spokesperson told FP the fact that the suit was dismissed with prejudice was “a recognition that LPL brought baseless charges and sought unwarranted relief.”
“In fact, this underscores that we took the lawful steps in clients’ best interests to inform impacted individuals of their data being shared without their authorization and contrary to our privacy policy, which protects them,” the spokesperson said.
READ MORE: LPL Financial drops data-breach defamation suit against Ameriprise
JPMorgan to pay more than $360,000 in back pay to fired private banker
FINRA arbitrator Andrea Goldman directed JPMorgan’s wealth management division, J.P. Morgan Securities, to pay a terminated private banker more than $360,000 in back wages after finding his termination resulted from a “woefully inadequate” internal investigation.
According to Goldman, Evan Becht, who was a private client banker for the firm before being fired in 2023, was dismissed over allegations that he falsely laid claims on incentives for onboarding clients’ money that he had no right claiming.
In addition to the payout of $363,200 plus interest, calculated based on what Becht would have made if he were still employed by J.P. Morgan Securities, the firm must pay an additional $50,000 and update Becht’s BrokerCheck page to add the statement that he was “Terminated by affiliate bank.”
A JPMorgan spokesperson said the firm “strongly disagree[s] with this decision and [is] exploring [its] options as to next steps.”
READ MORE: JPMorgan owes 2 years’ salary to fired private banker
Commonwealth Financial Network
Commonwealth’s successful appeal of $93M SEC penalty
Judges on the First Circuit Court of Appeals sided with Commonwealth Financial Network in early April, ruling that a lower district court made “fundamental legal errors” in a multimillion-dollar ruling against the firm last year.
Commonwealth was hit with more than $72 million in disgorgement and civil penalties and $21.2 million in prejudgment interest last year by Judge Indira Talwani of the U.S. District Court in Boston over allegations that the firm failed to properly disclose brokers’ conflicts of interest to investors when pushing specific mutual fund products.
The appeals court found fault in Judge Talwani’s ruling, stating that she overstepped when concluding that the alleged withholding of conflict-of-interest information from investors misguidedly steered investors toward more costly products.
“There are material issues of fact as to the importance of price, Commonwealth’s influence over the funds selected, and about the significance of the allegedly deficient disclosures, themselves,” according to the decision. “It is the role of a jury to determine those questions.”
The case will now head back to district court in Boston.
READ MORE: Commonwealth wins appeal of $93M SEC penalty ahead of LPL purchase
