Financial Attorney

Pair Leaves UBS Financial Services to Join Raymond James

From the Desk of Jim Eccleston at Eccleston Law LLC:


On October 25, 2016, advisors Harold MacFarland and Tadd Hicks left UBS to join Raymond James in St. Louis, Missouri. The team has $220 million in assets under management.

The attorneys of Eccleston Law LLC represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

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UBS Advisers Stage Revolt to Save Branch Manager

From the Desk of Jim Eccleston at Eccleston Law Offices:

UBS brokers in San Francisco recently staged a kind of mutiny with some prepared to resign in order to prevent their popular branch manager, Michael Williams, from being replaced.

The firm considered replacing Williams due to poor branch performance. Of the firm’s eight geographic regions, that region was ranked among the lowest in terms of recruiting.

Moves are common in the brokerage industry, where managers are frequently reassigned, relocated or sometimes fired as firms keep a close watch on performance. Advisers may be reluctant to see their manager go, but it is rare for the firm to backtrack on its decision.

About 20 of the 75 advisers objected. Many included top producers, who began placing calls to executives at the firm, including the head of the adviser group, the head of wealth management, and the firm’s chief executive. They told the executives the move was a mistake. Support for Mr. Williams mounted, and by the weekend, the firm reversed its decision.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

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FINRA Will Renew Push for Shift in Investment Adviser Oversight

From the Desk of Jim Eccleston at Eccleston Law Offices:

FINRA plans to renew its lobbying efforts for legislation that would shift oversight of financial advisers away from the SEC and into the hands of a self-regulating body, Investment News reports.

In 2012, FINRA first attempted to push such legislation. Its efforts were resisted by advisors and the measure died. FINRA backed down when the new Congress convened last year and the champion of the SRO bill, Rep. Spencer Bachus, R-Ala., relinquished his seat as chairman of the House Financial Services Committee.

FINRA is motivated to expand its regulatory authority because the brokerage industry is shrinking.

Over the past two years, FINRA has maintained that it isn’t mounting a lobbying campaign to become the adviser SRO and isn’t engaged in talks with the House or Senate. But FINRA has repeatedly stated that adviser oversight should be increased.

Both FINRA and the Investment Adviser Association (“IAA”) agree that there is a regulatory gap regarding investment advisers. The SEC currently examines only about 8 percent of the nearly 11,000 registered investment advisors in the country on an annual basis.

The SEC’s failure to examine more investment advisers largely is due to a lack of resources. In adopting the current budget, Congress denied the SEC’s request to hire an additional 250 investment adviser examiners.

The restrictive budget leaves the door open for FINRA and its allies to argue that inadequate adviser oversight should be addressed by contracting out this critical function to a private organization like FINRA.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

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5 Big Tech Trends in the Financial Advisory Industry

From the Desk of Jim Eccleston at Eccleston Law Offices:

According to InvestmentNews, the five best and brightest tech trend in financial services industry are the wizardry of “big data” algorithms, wearable tech for go-anywhere advisers, video-game-inspired business applications, deep content analysis by supercomputers such as IBM’s Watson, and software that has an uncanny ability to read facial expressions and emotions.


Tech teams in the financial services industry are studying how to use big-data analytics and statistical probability to better know their customers, including advisers and their clients.

Big data is so big that even the smartest of technophiles have a hard time managing it. This is because it encompasses a huge flow of information about customers, products and services that companies have been gathering for years.

Much of this information, whether collected from traditional or digital databases, has moved into the cloud and continues to grow exponentially.


Technology will be less visible as computers disappear into user-friendly hardware.

Fidelity has designed an “office of the future” prototype on its Smithfield, R.I., campus that shows registered investment advisers how they will use all that new technology to better engage with their clients. Improved video conferencing and better gadget management also will catch on in the smart office. Moreover, Fidelity was the first major brokerage firm to make a public foray into wearable technology six months ago when the Fidelity Labs research and development unit was granted early access to Google Glass and created a Glassware app that lets wearers focus their vision on a logo of a publicly traded company to generate a real-time market quote, according to analysts at online and mobile research firm Corporate Insight.


Advisers take their work seriously, so the idea of bringing game dynamics into their practices to encourage desired client behavior can make them nervous. But consumer websites and online communities have been using game mechanics to motivate participation and loyalty for years. For example, Money Mind’s web app is played as a question-and-answer game by couples to determine whether each partner is most driven by fear, happiness or a need to commit. Advisory firm United Capital Private Wealth Counseling has used its Money Mind Analyzer to work with 45,000 clients and prospects since 2010.

More participants in the financial services industry are starting to venture into the new frontier of “gamification.”


IBM is actively seeking to use Watson, IBM’s supercomputer which could sort and analyze vast amounts of data faster than its human competitors, for industrial applications, as the supercomputer is moving into the realm of financial planning.

On a “Watson in finance” web page on its website, IBM states that Watson is being designed as “the ultimate financial services assistant,” capable of performing deep content analysis and evidence-based reasoning to help advisers make informed decisions about investments, trading patterns and risk management.


Advisers will be able to do some conjuring of their own with voice, mood and facial analytics.

For example, Pershing is using voice analysis, a technology that is catching on at call centers. Customer calls to Pershing are analyzed for empathy expressed by company representatives, silent time on calls and behavioral cues when customers use phrases such as “I’m so frustrated” and “I can’t believe this takes so long.”

Beyond voice, cloud-based emotion capture technology now under development uses computer vision to recognize viewers’ emotional responses to products and services.

Already, products such as Affectiva Inc.’s Affdex,,, Noldus Information Technology’s FaceReader and Sightcorp, have arrived on the market to provide companies with consumer analytics based on age, gender, eye tracking, facial expressions, mood and attention level. For example, Sightcorp’s webcam eye-tracking software lets companies detect where product users’ attention is focused in a controlled lab setting.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

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Jim Eccleston: Non-Solicitation Agreements: What Can You Say Without Crossing the Line?

From the Desk of Jim Eccleston at Eccleston Law:

John Lindsey, a former Edward Jones broker, found himself in hot water after accusations that he violated his non-solicitation agreement.  In March 2012, Mr. Lindsey left Edward Jones to go independent, taking with him about half his clients.  In response, Edward Jones promptly filed a request for an injunction and temporary restraining order.  Edward Jones claimed Mr. Lindsey had violated his one-year non-solicitation agreement by misappropriating client information and wrongly soliciting clients.  Specifically, Edward Jones’ non-solicitation agreement prohibits an advisor from soliciting clients of the firm for one year after the advisor’s departure.

In May 2012, the Ventura County Superior Court in Ventura, California granted the injunction, upholding Edward Jones’ non-solicitation agreement.  However, Judge Tari Cody’s also found that nothing in that agreement prohibited Mr. Lindsey from servicing Edward Jones clients who reached out to him directly.  Subsequent to the ruling, Edward Jones asked a FINRA arbitration panel to make the injunction permanent and requested $5 million in compensatory damages.  Both of those requests were denied.

The arbitrators’ decision reaffirmed previous guidance given by FINRA’s predecessor, the National Association of Securities Dealers, which had issued a notice stating “that obtaining temporary restraining orders to prevent customers from following a registered representative to a different firm may be similar to the unfair practice of delaying transfers” of clients to a new advisor.

FINRA’s position has been that firms cannot do anything to stop clients from going to a broker of their choice.  The court’s ruling reflects a similar position, stating that “[n]othing herein [the non-solicitation agreement] shall prohibit [Mr. Lindsey] or anyone else from: (a) continuing to provide services to [Mr. Lindsey’s] clients who have already moved business away from Edward Jones; (b) providing services to persons who have indicated that they wish to transfer their accounts from Edward Jones to permit [Mr. Lindsey] to continue as their financial advisor.”

The attorneys of Eccleston Law represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

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Jim Eccleston: FINRA’s Proposed Procedure for Reps Not Named in Arbitration to Obtain Expungement of U-4 and U-5 Filings

From the Desk of Jim Eccleston at Eccleston Law:

FINRA has proposed new rules that would permit unnamed financial advisers who are the “subject of” allegations of sales practice violations made in investment-related customer-initiated arbitration claims, but who are not named as parties to the arbitration, to seek expungement relief by initiated In reexpungement proceedings at the conclusion of the underlying customer-initiated arbitration case.  Specifically, the following are the new proposed FINRA rules:  Rule 12100(z) (“Unnamed Person”); Rule 12806 (“Expungement of Customer Dispute Information by Persons Named as Parties); Rule 13100(cc) (“Unnamed Person”); Rule 13806 (“Expungement of Customer Dispute Information by Persons Named as Parties); and Rule 13807 (“Expungement of Customer Dispute Information by an Unnamed Person”).

The current Code of Arbitration Procedure for Customer Disputes and the Code of Arbitration Procedure for Industry Disputes do not provide unnamed persons with express procedures to seek expungement of those types of allegations.  The SEC is expected to set an approval date of early 2014.

There are several benefits for brokers.  First, the new rules would allow unnamed brokers to use this explicit procedure instead of having to intervene in the arbitration filed by the investor or initiate a new arbitration case in which the broker requests expungement relief and names the investor or firm as the respondent.  Another benefit is that the expungement proceedings would commence only after the underlying customer arbitration is concluded.  Another benefit is the possibility that the arbitrator reviewing the In reexpungement proceedings will already be familiar with the case.  Under the proposed rules, the public chairperson of the underlying arbitration would handle the In reexpungement proceedings.

While our adviser clients currently do have avenues for expungement, FINRA’s new rule proposals greatly would expedite and simplify the entire process.

The attorneys of Eccleston Law represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

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Jim Eccleston: Morgan Stanley Suffers Big Asset Loss

From the Desk of Jim Eccleston at Eccleston Law:

The nation’s largest brokerage by adviser head count, Morgan Stanley Wealth Management, lost $8.4 billion in client assets during the third quarter, as some of its major producers took their business to competing firms. In the three-month period ended September 30, 2013, the average assets under management of advisers who moved also jumped nearly 25% from the previous year, to $402.2 million. Generally speaking, adviser movement with small books of businesses is not tracked by the data, and advisers do not necessarily take all of their business to the new firm.

Four of the 10 largest departures from Morgan Stanley in the third quarter were to other wirehouses. Three teams managing $7.9 billion in assets moved to UBS Financial Services Inc., while a $1 billion team in the New York area switched to Wells Fargo Advisors LLC.Morgan Stanley did add some major advisers last quarter. However, high-profile losses appeared to offset Morgan Stanley’s recruitment successes last quarter.

Given that Morgan Stanley had 16,321 advisers and $1.8 trillion in assets at the end of the second quarter, according to the company’s regulatory filings, it still is the largest wirehouse by advisers and the second largest by assets.

The attorneys of Eccleston Law represent investors and advisers nationwide in securities and employment matters.

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Jim Eccleston: FINRA Provides Additional Guidance for Financial Services Firms to Comply with New Suitability Rule | Advisor

From the Desk of Jim Eccleston at Eccleston Law:
FINRA (the Financial Industry Regulatory Authority) has had an opportunity to examine how financial services firms are complying with FINRA Rule 2111, effective July, 2012. The new rule made several important changes, especially related to recommendations of investment strategies and recommendations to hold securities positions. Based upon examinations of firms conducted during the last year, FINRA has issued Regulatory Notice 13-31. Let’s highlight the key provisions.

As background, Rule 2111 relates to recommendations made by a financial adviser and his or her firm. Historically, the application of the rule was limited to recommendations to buy or sell securities. In the new rule, FINRA added recommended investment strategies involving a security or securities, including the explicit recommendation to “hold” a security or securities.

Also, in making a recommendation, Rule 2111 continues with the requirement that the financial adviser and his or her firm have a “reasonable basis” to believe that the recommendation is “suitable.” However, the new rule added several requirements. First, FINRA expanded the list of information required to ascertain the customer’s suitability profile. The list includes the customer’s age, investment experience, time horizon, liquidity needs and risk tolerance as information items that advisers and their firms must attempt to obtain and analyze.

Second, the new rule recited the “three main suitability obligations” according to Regulatory Notice 13-31. They are “reasonable-basis”, “customer-specific” and “quantitative” suitability obligations. In short, reasonable basis means that a recommended security or investment recommendation is suitable for at least some investors; customer-specific means that the recommendation is suitable for a particular customer; and quantitative means that “a series of recommended transactions, even if suitable when viewed in isolation, are not excessive.”

In light of the new requirements of the suitability rule, FINRA examiners have analyzed the firms’ “controls”, including testing the firms’ supervisory and compliance systems. FINRA examiners also have reviewed for “Red Flags” of possible deficiencies. Those Red Flags include: a long term investment for an investor with a short term time horizon; or a speculative investment or strategy held in the account of a conservative investor. FINRA concludes in its regulatory notice that the most common deficiency among firms was having inadequate procedures for “hold” recommendations.

Based upon those examinations, Regulatory Notice 13-31 discusses numerous “observations of effective practices” to provide guidance to firms and their advisers. For example, in the guidance regarding reasonable-basis suitability, FINRA commented on an effective way some firms use to ensure that their financial advisers understand the (sometimes complex) products that they are recommending. Those firms “post due diligence on products (and accompanying documents) to an internal website that [advisers] can access when recommending a product.” The information “includes audited financial statements, notes of interviews with key individuals of the product sponsor or issuer, and other information relevant to understanding the product and its features.”

Likewise, in the guidance related to customer-specific suitability, FINRA comments that some firms bolstered compliance by requiring specific customer suitability information such as high risk tolerance, low liquidity needs, substantial investment experience, and an indication that the recommended transaction represents a small percentage of a balanced portfolio.

Finally, the guidance regarding investment strategies and hold recommendations is notable. FINRA notes that effective compliance and supervisory systems included the following:

• A “hold ticket” or “hold blotter” that captures hold and, in certain instances, other types of strategy recommendations;
• Notes of discussions with clients regarding explicit hold or other strategy recommendations by associated persons maintained in customer files;
• Firm branch office inspections focused on the documentation of hold and other strategy conversations with clients;
• Modified new account forms to include specific investment strategies (determined by the firm) which could be identified if an adviser recommends them at the time of the account opening;
• New or amended account opening forms that must be signed by the customer when advisers recommend changes to a previously recommended account investment strategy; and
• A prohibition on advisers’ engaging firm clients in any business activity that an adviser conducts outside of his or her firm.

Although FINRA states that Rule 2111 generally does not impose explicit documentation requirements, some documentation likely is necessary for adequate supervision. The regulatory notice states, “The type or form of documentation that may be needed is dependent on the facts and circumstances of the investment strategy or hold recommendation, including the complexity and risks associated with the security or investment strategy at the time of the recommendation.” Firms must find a way “to capture hold and other strategy recommendations.”
As one can see, Regulatory Notice 13-31 contains a great deal of helpful guidance for firms to implement to ensure that recommendations are suitable.

The attorneys of Eccleston Law represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.
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