Vermont Investment Loss Attorneys

For over 25 years, the investment loss attorneys at Malecki Law have been bringing successful actions, recovering tens of millions of dollars on behalf of investors against financial firms like Robinhood, Merrill Lynch, Morgan Stanley, and other well-known players in the industry, for losses caused to investors through the firm’s lack of supervision. The Vermont Department of Financial Regulation (DFR) is the state agency responsible for the protection of Vermonter investors in banking, securities (investments), insurance, and other financial related areas. DFT has brought numerous regulatory actions against financial firms that have failed to follow industry rules, including a recent March 2022 enforcement action for $640 million against Robinhood Financial that “addresses Robinhood’s lack of supervision when approving option or margin trading customer accounts.” As reflected in the settlement, Robinhood’s failures affected at least 40 Vermont customers who reported outages with their mobile app that prevented them from being able to execute trades.

Additionally:

“The settlement also reflects the Department’s finding that Robinhood’s wholly automated process was inadequate to determine which investors should be approved for high level option and margin trading. Option and margin accounts present increased financial risk and should be reserved for experienced traders. Applicants for margin- and options-enabled accounts were required to answer questions about their financial situation and experience. Their answers and user profile were then autonomously compared to the company’s minimum requirements. Much of the self-reported information was not subject to verification and rejected applicants could reapply immediately and be accepted by changing their answers.”

Robinhood clearly put many of its investors in danger, allowing options and margin trading for many new investors who have little understanding of their risks.

But no matter how much money investors seem to lose to firms who fail to properly supervise their systems and accounts, regulatory actions alone still leave many investor victims out of pocket, rarely making them whole. For this reason alone, it is important for any investor who has been defrauded or misled in the financial markets to not solely rely on the success of a regulatory action, which can take years if seen through to completion at all, but to also consider bringing a parallel civil lawsuit against the firm that should have been keeping a close eye on your account. It is, thus, important to hire counsel from an experienced, investment loss law firm like Malecki Law, whose investment loss lawyers are familiar with how financial firms operate, as well as knowledgeable about the supervision rules they must abide by.

Brokerage and other financial firms have a legal obligation to supervise their employees, systems, and accounts, as spelled out, for example, in FINRA Supervision Rule 3111(a), which states:

“Each member shall establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules. Final responsibility for proper supervision shall rest with the member.”

The italicized emphasis is added to denote the affirmative obligation that these firms have when faced with a lawsuit alleging a failure to supervise – it is the firm that has the burden to prove it had supervisory controls in place. This makes sense because it would otherwise be close to impossible for any investor to prove the absence of something, other than pointing to the losses in their account statements.

If you are a Vermont resident and believe your account was mismanaged or believe that your broker caused losses in your account, you should contact the investment loss attorneys at Malecki Law for a free initial consultation. Our attorneys always ensure that investors are properly represented in accordance with state rules. We have litigated numerous lawsuits alleging failure to supervise in federal and state court, as well as in FINRA Arbitration, the forum where most retail investors are required to resolve their disputes. We know how to navigate these forums and what documents to seek from a financial firm to prove that an account was not properly supervised. Our results speak for themselves.