Would you hire a non-attorney to represent you in Finra arbitration if you knew he had a 1 percent win rate? How about if he routinely cost investors tens of thousands of dollars in forum fees or had been fined and barred from the securities industry for life by the Securities and Exchange Commission?
This is a sampling of the “rogues' gallery” of non-attorney representatives who are currently representing aggrieved investors in Finra arbitration, according to an explosive new report released Monday by the Public Investors Arbitration Bar Association (PIABA).
“What we’re seeing is that investors who are victimized by their securities firms are victimized a second time by these NARs (non-attorney representatives) firms,” PIABA President Andrew Stoltmann, a co-author of the new PIABA report, said at a press conference Monday.
The PIABA report “A Menace to Investors: Non-Attorney Representatives in FINRA Arbitration,” is a compendium of the shadowy operations, unethical practices and subpar recovery records of five of the leading non-attorney firms who represent investors in Finra arbitration.
“As you see from our report, over and over again people who have been barred by regulators keep showing up,” Stoltmann said. “The only way to fix this problem is to bar NARs from arbitration.”
Finra is considering whether to limit or completely prohibit NARs from representing investors in Finra arbitration. Monday was the last day to comment on the notice.
“Right now, NARs are a loophole in the arbitration code that we are trying to tighten up,” Stoltmann added.
These are among the so-called rogues gallery of non-attorney representatives and firms PIABA found:
-Richard Sacks, the owner of Investors Recovery Service in Novato, Calif., who was barred by the SEC for unfair pricing, markups and fictitious trading he used to justify a loan. His now-defunct brokerage firm was subject to a least a half-dozen regulatory actions. While Sacks should be prohibited by Finra rules from acting as an NAR, he was still representing investors as of October.
-Paul Schechter, the founder of Vindication Recovery Services in Mount Sinai, N.Y., has been disciplined by various securities regulators, including Finra, which alleged he engaged in abusive sales practices, unauthorized trading, unsuitable recommendations and trading/churning. Finra barred him for two years and he was ordered to pay a $150,000 fine in 2010. A review of Finra’s award database shows no arbitration awards when VRS represented claimants, PIABA said.