Overview
On January 28, 2025, FINRA released its annual regulatory oversight report (the “Report”). Among other things, the Report flagged two types of financial products that have impacted public investors within the statutory limits for filing FINRA Arbitration claims: (i) Small Cap Initial Public Offerings (“IPOs”); and (ii) Registered Index-Linked Annuities (“RILAs”). In addition, the Report provided valuable resources for Senior Investors.
Manipulative Trading in Small Cap IPOs
In its report, FINRA advised that it observed manipulative trading in IPOs for certain small cap, exchange-listed issuers, dating back to 2022. The scheme involved unusual price increases associated with manipulative trading activity from nominee accounts. At first, the price increases happened on the day of the IPOs, or shortly thereafter. But more recently, the increases have happened in the weeks or months following the IPOs. After the prices spike, nominee accounts sell their shares and funnel the funds to international omnibus accounts controlled by foreign bad actors. In its regulatory examinations and investigations, FINRA discovered that certain financial institutions did not have proper procedures in place to identify, monitor, or resolve the manipulative conduct. This violates several FINRA rules for customer disputes, prohibiting firms from engaging in manipulative trading.
Unsuitable Recommendations of RILAs
In addition, FINRA detailed that RILA investments are an emerging trend that impact billions of public investor dollars. A RILA is a deferred annuity tied to the performance of one or more stock market indices offered by insurance companies. A RILA is a complex financial product with significant risks that realizes gains and losses periodically regardless of market conditions. In its regulatory examinations and investigations, FINRA discovered that certain financial institutions failed to properly supervise their registered representatives’ recommendations of RILAs to public investors that were not in their best interest. This violates the SEC’s Regulation Best Interest and FINRA rules.
Senior Investor Resources
FINRA also provided valuable resources and information on senior investor protection, including information on Trusted Contact Persons (“TCP”) and links to Securities Helplines, Investor Alerts, a Threat Intelligence Product, and more. A TCP is a person authorized on your account that can speak to your financial advisor in limited circumstances to prevent financial exploitation. According to the Report, FINRA found that financial institutions had improper TCP records, among other issues. This violates multiple FINRA Rules.
Impacted Investors
If you have suffered investment losses after investing in Small Cap IPOs or RILAs, or because a TCP was not properly established on your account, do not hesitate to contact our office at 800-556-3526 or complete our contact form for a free consultation. We work on a contingency fee basis to try to recover losses. In other words, if we do not obtain a recovery, you do not owe us any legal fees. Act before time runs out on your claim.