Securities Fraud Lawyer Blog

Updated Rules from the Texas State Securities Board

April 25, 2025 | Bryan Forman

The Texas State Securities Board has announced a significant update to its rules, effective March 13, 2025, which introduced several key changes designed to align Texas securities laws with federal regulations and standards set by industry organizations such as FINRA and NASAA. Here are the key points:

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.
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.

Were You Properly Allocated Before the Recent Downturn?

August 11, 2022 | Bryan Forman

When the market gets rough and recession fears spike, investors may believe losses are inevitable. While this can be true, especially in the recent market downturn, there are steps you and your broker or advisor can take to properly allocate your investment portfolio to best position your finances to survive the downturn. While losses are likely, they can be mitigated by a smart investment strategy that properly considers the risks. If your account is not suitably invested, but has too much embedded risk, it is likely that the losses you suffer during a downturn will exceed your risk tolerance. Changing the portfolio risk and allocation is a must, but it may be too little, too late.

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.

Broker Use of Personal Devices Lands Morgan Stanley in Hot Water

July 18, 2022 | Bryan Forman

Communication via personal text messages or personal email could be a major warning sign that your stockbroker or investment advisor is engaging in investment and securities fraud. While not all uses of personal devices for broker-client contact are cause for concern, these messages are often difficult to regulators and firms to monitor. Because these parties need to monitor communications to prevent fraud both internally and by external enforcement, the use of unapproved devices has become a fineable offense. Regulatory authorities are cracking down on these practices to better protect investors and their holdings. Firms are responding with internal compliance measures—or paying the price.

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.

Is Your Broker Sending You Texts or Emails from a Personal Account?

July 10, 2022 | Bryan Forman

Stockbrokers and investment advisors are trusted financial professionals. However, as they say, there is a bad apple in every barrel. And if you’ve been watching the news over recent months, the finance industry certainly has its share of bad apples when it comes to investment and securities fraud. But how can you tell if your broker is one of them? What may be some warning signs?

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.

Ex-Broker for UBS Alleged to Have Bilked Investors for Over $17 Million

May 18, 2022 | Bryan Forman

Stockbrokers and financial advisors occupy a place of trust. And, in most cases, a client’s trust in their financial advisor is well-placed. However, perhaps more often than most people realize, stockbrokers and financial advisors engage in illegal conduct specifically intended to enrich themselves at their clients’ expense.

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.

Need to Know Info for Texas Investors Considering Adding Cryptocurrency to Their Holdings

April 6, 2022 | Bryan Forman

Over the past decade, cryptocurrency has been all the rage. It all started with Bitcoin, which was created back in 2008. However, since then, the number of cryptocurrencies has grown significantly, as have the ways that investors can purchase these assets.

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.

Beware of Financial Fraud During Troubled Times–Ed Martin, Sage Investigations, LLC

March 26, 2020 | Bryan Forman

From Bryan Forman, Forman Law Firm, P. C.–In an effort to provide our readers with unique perspective of other professionals in the world of investments and securities regulation, arbitration, and litigation, I will occasionally invite friends, colleagues, and other experts to publish a blog piece from their unique perspective. If you like what they have to say, please say so and forward! Thanks for reading.

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.

Should I Stay, Or Should I Go Now?

March 15, 2020 | Bryan Forman

As I sit here on a Sunday afternoon, listening to some tunes and wondering what will be the ripple effect of these strange times, particularly for the retail investor who has enjoyed an 11 year run of a bull market, I for some reason thought of The Clash’s “Should I Stay, Or Should I Go Now?”. It’s worth a listen…

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…?”

For Many That Invested Heavily on Margin, Their Chickens Have Come Home to Roost.

March 12, 2020 | Bryan Forman

How Margin Risk Can Devastate a Brokerage Account.

WAAAAY BACK in January of 2018, I blogged about how trading on margin, even in a prolonged bull market, can have devastating results if (when) the markets dramatically decline. See, “Investing On Margin—Will Your Chickens Come Home to Roost?” I was concerned for those investors for which margin investing might be unsuitable, as the outcome can be devastating. Certainly, there are generations of new investors with a great deal of investment dollars that only began investing real money during this bull market; meaning they have never faced a down market and the margin calls that come with. This may be a rude awakening.

With the recent Coronavirus Correction (headed toward recession), it is likely that many investors that were investing using margin have suffered significant losses, AND had to sell other securities in order to cover margin calls. In my January 2018 post, I noted that at the end of November 2017, FINRA reported there was more than $627 Billion in margin debit balances in retail customer accounts, compared to $553 Billion at the beginning of 2017, more than a 13% increase in borrowing to invest in stocks (Note: A margin debit balance represents the amount of money the investor owes the brokerage firm). Two years later, at the height of the bull market, FINRA reported there was $561 Billion in margin debit balances in retail customer accounts, a ~10% decline from the same statistic from two years before. Overall, 2019 showed somewhat lower levels of margin than 2018 and 2017, so based on this alone, it would appear that borrowing to invest leveled out at the “end” of the recent bull market. However, if one were to look at the margin debit levels in 2010-2012/13, margin balances have doubled! Clearly, investors wanted to leverage their accounts by purchasing securities using margin debt. But, as the analogy for this post goes, your chickens may come home to roost amid this market correction!

Texas Securities Act– The Statutory Basis for a $2.8 Million Arbitration Award On a $1.6 Million Investment.

March 11, 2020 | Bryan Forman

Austin, Texas Investor Wins $ 2.8 Million in Arbitration on Claims Under The Texas Securities Act

Investors in Private Offerings in Texas Have Substantial Tools At Their Disposal Through the Texas Securities Act (TSA).

In February of 2018, we posted a piece about how the Texas Securities Act was a “Powerful Tool For Victims of Oil and Gas Fraud” and we discussed how the TSA might apply to oil and gas investments, as we were seeing a significant number of investors’ inquiries about their investments in private oil and gas deals. As we noted, the TSA considers “any interest in or under an oil, gas or mining lease” to be a security. It is true that the TSA is a powerful tool for oil and gas investors that have been lied to about a deal, but the TSA is not limited to just oil and gas deals, but is applicable to the offer or sale of any security or investment contract. In this post, we highlight one of the firm’s recent awards where our client received all of his investment back, plus interest, costs, and a substantial award for his attorneys’ fees. The investment was not in an oil and gas deal, but was a somewhat typical investment in a start-up venture.