Teen Investors

Trading Apps are Targeting Teen Investors

Sep 20, 2021

Buckle up folks, the brokerage industry has found an entire new audience—teenagers. While most people know that anyone who is over the age of 18 can open a brokerage account quite easily, you might be surprised that the next phenomenon is the 13-17 year old market.  Yes, that trading app might now appear right next to your child’s Instagram app on their Iphone.  Firms are Encouraging Kids to Trade Stocks Recently, Fidelity has  announced its launch of a special  account geared to kids aged 13-to 17-year, allowing them to save,  spend ,  trade and invest with zero commission. Called the Fidelity Youth Account,  it is touted as “A brokerage account owned by teens 13 to 17 that’s built to start their investing journey. They can trade most US stocks, ETFs, and Fidelity mutual funds in their own accounts.” The app allows parents and guardians to monitor their teen’s account activity. According to Fidelity’s website: Parents/guardians who currently have a Fidelity account can open this account with their 13 to 17 year old. At age 18, your teen’s account will be transitioned to a retail brokerage account for free. Parents are responsible for their teen’s activity and can monitor account activity online, and through monthly statements, trade confirmations, and by viewing debit card transactions. You can also set up alerts to notify you of trades, transactions, and cash management activity. Fidelity is not the only one…….other youth-oriented trading apps are also spouting up. New startups  Greenlight Financial Technology, Stash, and M1 Finance are also seeking to attract young investors, according to Barron’s. Like at Fidelity, using Greenlight kids, with parental approval, can buy fractional shares of securities and start investing with as little as $1 with no trading fees. Greenlight’s website states “Parents approve every trade, right from the app.”  Greenlight also touts that “the all-in-one plan teaches [kids] money management and investing fundamentals — with real money, real stocks and real-life lessons.” But, what exactly are those lessons? Are these Apps Promoting Gamification? While these new  trading platforms for kids spin themselves as educating young investors, some experts argue that these platforms are designed to gamify stock trading, and instead might be detrimental to teens. The SEC is looking into this new world of stock-trading apps, and examining whether they use digital cues and prompts that could be influencing their user’s investment decisions. Indeed, according to Barron’s some critics say that certain stock-trading apps look more like online games or gambling, and that their graphic designs are coercing users into making bad investment decisions. In a new release , the SEC said it was seeking public comment “related to the use of digital engagement practices by broker-dealers and investment advisors.” The SEC may be able to use its power to review some of the underlying technology that brokerage apps use to reach customers and track their actions. These tools include things such as behavioral prompts, game-like features (commonly referred to as gamification), and other features designed to engage with retail investors on digital platforms, as well as the analytical and technological tools and methods to gather information. Young People With No Experience are […]

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Investment Loss

How Can I Sue My Stockbroker for Investment Loss?

Sep 13, 2021

Many investors who call our offices are surprised to learn that if they want to sue their stockbroker or financial advisor that they have waived their right to sue them in court/ This does not mean that you do not have any legal rights.  It simply means that you must bring your claims against your stockbroker through the FINRA arbitration system. FINRA stands for the “Financial Industry Regulatory Authority,” which provides the primary arbitration forum for harmed investors to file their claims. What are Arbitration Clauses and What should Investors Know? If you lost money in your  investment  account at a brokerage firm such as Merrill Lynch, Morgan Stanley, UBS, Charles Schwab and even a self-directed account on an app such as Robinhood , your account agreement likely contains an arbitration agreement requiring that your claims be arbitrated through FINRA.  If you have a brokerage account, you might be surprised to know that  you’ve agreed,  by signing a new account form, to arbitrate your claims regarding your brokerage account. Buried in your account agreement is something called an “arbitration clause.” This clause creates a contractual agreement between you and your brokerage firm which requires that all disputes be resolved through the FINRA arbitration process. There is really no way around this clause, which mandates FINRA arbitration instead of litigation in court.   The U.S. Supreme Court has ruled that these clauses are enforceable, meaning that you can’t get out of them because they found that FINRA arbitration is just as fair to consumers as being in court. One significant difference between FINRA arbitration and court litigation is that there’s  an extremely limited  and narrow right of appeal. In fact, in some states like Florida, you can be sanctioned and have to pay money to the opposing side for even trying to appeal a FINRA arbitration award without adequate grounds. Basically, the FINRA decision is final and binding in just about every case. A lot of folks mistakenly believe that arbitration is just the first step, and that then they can complete their case in a  court. This is a wrong assumption. FINRA arbitration is generally your one shot to have your investment fraud or negligence case heard and that’s it. Because of this, it’s crucial that  you hire a FINRA attorney who knows the ins and outs of this practice. How Do I Start a FINRA Arbitration?  First: Hire a FINRA Arbitration Attorney Like going to a doctor who specializes in your illness or condition, it is important to hire an experienced  FINRA attorney who  knows how to  represent investors in FINRA arbitration cases. Investor claims filed in FINRA are subject to the FINRA Code of Arbitration Procedure which provides the procedures which must be followed. Hiring an investment fraud lawyer who knows these rules, as well as one who is familiar with the arbitration process, can maximize any recovery you might get in your case. When looking to hire an  investment fraud attorney, it is helpful to ask the following questions to be sure that the lawyer you have found is experienced enough to  help recover your investment fraud losses. You should ask about that attorney’s […]

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securities and exchange commission

Tell the SEC About Your Experiences with Online Trading Apps

Sep 6, 2021

The Securities and Exchange Commission (“SEC”) has just posted a “request for information and comments” seeking  information  concerning the  “digital engagement practices” that are used by online and app based brokers. The SEC reports that it is looking into the methods by which  brokerage firms are using digital tools designed to  appeal to their investors’ behavioral tendencies. In particular, the regulator is looking into game-like engagement (commonly referred to as “gamification”) which online firms use to encourage investor activities on their websites, portals and mobile apps. The SEC is focusing on  behavioral prompts, differential marketing, and other elements or features which are specifically designed to engage with retail investors on digital platforms as well as the analytics and technology behind them.  These are called digital engagement practices or “DEPs”  In his remarks regarding this request for comment, the new SEC Chairman, Gary Gensler, states “In the last few years we’ve seen a proliferation of trading apps, wealth management apps, and robo-advisers that use these practices to develop and provide investment advice to retail investors.” Chairman Gensler  notes that “In many cases, these features may encourage investors to trade more often, invest in different products, or change their investment strategy. Predictive analytics and other DEPs often are designed with an optimization function to increase revenues, data collection, or customer time spent on the platform. This may lead to conflicts between the platform and investors. I’m interested in the varied questions included in the Request for Comment, and I’m particularly focused on how we protect investors engaging with technologies that use DEPs.” The SEC Asks for Investor’s Real Life Trading Experiences  The SEC’s request for comments specifically asks for input from investors  in a “feedback flyer” regarding their experiences with these trading platforms. Some of the more interesting questions include the following: 1. What would you like us to know about your experience with the features of your online trading or investment platform? (Examples of features are: social networking tools; games, streaks, or contests with prizes; points, badges, and leaderboards; notifications; celebrations for trading; visual cues, like changing colors; ideas presented at order placement or other curated lists or features; subscription and membership tiers; or chatbots.) 2. If you were trading or investing prior to using an online account, how have your investing and trading behaviors changed since you started using your online account? (For example, the amount of money you have invested, your interest in learning about investing and saving for retirement, the amount of time you have spent trading, your knowledge of financial products, the number of trades you have made, the amount of money you have made in trading, your knowledge of the markets, the number of different types of financial products you have traded, or your use of margin.) The deadline to complete the SEC’s Feedback Flyer is October 1, 2021.  After the deadline for comments, the SEC might create new regulations governing these trading apps. Interestingly , the question looms as to whether, by encouraging users to buy and sell securities, platforms such as Robinhood might actually be making “recommendations” to their customers.   No Such Thing as “Free”  […]

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Stockbroker

How Long Do I Have to Sue my Stockbroker?

Aug 23, 2021

Like having milk in your refrigerator, it’s not a good idea to let your securities fraud case sit too long. There are strict time deadlines for filing your securities fraud claims. The most common legal deadline is called a statute of limitations. This is a legal rule that may bar your claim if it is not filed on time. If the time clock on the statute of limitations runs out in your case, you will most likely lose your right to take any legal action. The best thing that you can do to avoid losing the right to bring your claim is hiring an attorney as soon as you learn of the harm or the bad conduct causing you harm. In a securities case, this can be as soon as you discover a loss, or as soon as you learn of a misrepresentation by your stockbroker, investment advisor or your brokerage firm. Statutes of limitation or other time bars apply in various areas of criminal and civil law, including in some FINRA arbitration actions. Time limits and other sensitive time deadlines in investment fraud cases are often very complicated. This is why you need to consult with an experienced investment fraud attorney as soon as possible once you think you might have a case. Investment Fraud: There are Two Separate Time Issues If you are thinking about suing your stockbroker or brokerage firms, your claims are generally subject to mandatory FINRA arbitration. FINRA is the Financial Industry Regulatory Authority, and it has a dispute resolution department that handles the arbitration claims between brokerage firms and their customers. Instead of having a court hear your complex securities matter, the FINRA arbitration forum appoints arbitrators who have the necessary securities or business expertise to understand the particular legal issues surrounding allegations of investment fraud or negligence. Because almost all investors at brokerage firms are subject to this mandatory FINRA arbitration, most securities fraud and broker negligence claims are resolved this way. If you believe you have been a victim of securities fraud or any other type of broker misconduct, you have a limited amount of time to file your arbitration claim. Figuring out exactly how much time you have to sue your stockbroker or the brokerage firm can be quite complicated. First, there are two separate timing issues that must be considered: Eligibility under the FINRA Rules; and Applicable statutes of limitation. Be Sure to File Your FINRA Arbitration Claim on Time Unlike court, FINRA arbitration has an “eligibility” rule, requiring that all claims must be brought within six years of the occurrence or event giving rise to the claims. If you fail to take action within this time, you may lose the ability to take action at all. This seems like a simple rule, but it’s not. While the brokerage firms like to measure the six years from the date a stock or investment is purchased, there are a number of other events that may trigger a later date for the running of the six year rule. For example, an unsuitable recommendation to hold a stock, or an ongoing fraud in […]

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money trading

Did You Lose Money Trading Options At Robinhood?

Jul 12, 2021

Robinhood was recently ordered by FINRA to pay almost $70 million —the largest single penalty FINRA has ordered to date—in part as a result of its widespread misrepresentations concerning the potential risk of loss to its customers who were engaged in trading options spreads. FINRA found that between January 2018 and March 2021 Robinhood published false and misleading statements concerning  the “risk of loss”  with respect to debit spreads. It also found that Robinhood falsely reassured its customers who had engaged in options spreads that they need not take steps in order to mitigate their risk as they approached the options expiration date. Robinhood was found to have provided customers with false information about the actions Robinhood would take with respect to those spreads on their expiration date. In another portion of the order, Robinhood was sanctioned for improperly approving clients under 21 for risky options trading.  FINRA found that, as a result of these misrepresentations and omissions on the risk of options spreads, that at least 630 customers incurred losses totaling over $5.73 million. The order requires that Robinhood pay $5,731,520.67 as restitution for losses that its customers suffered as a result of these negligent misrepresentations and omissions. Robinhood states  that it already has paid or that it  intends to pay $3,639,948.70 of that amount to 134 of its affected customers.  Robinhood Mislead Customers about Options Risks The regulator found that Robinhood’s reassuring statements were false and misleading because they failed to account for the risk its customers faced in either of these two alternative scenarios:  Options Trading Scenario 1– A short option that is held to expiration is assigned and the long option expires worthless; or  Options Trading Scenario 2– A short option is not assigned and the long option is exercised, whether by Robinhood or by the customer.  FINRA found that despite Robinhood’s assurances to its customers about risk, in each of these two scenarios a customer can incur losses far exceeding the premium  amount the customer paid to enter into the options spread transaction. Below is the risk statement Moreover, through its website and in direct customer emails, Robinhood falsely assured customers that it was not necessary for the customer to act  in order to mitigate risk in the days and hours leading up to the options expiration date. Robinhood informed its customers through its website that, if at expiration,  the stock price went “below the low” (in call credit spreads) or “above the high” (in put credit spreads), Robinhood would “automatically let both options expire worthless, so you don’t need to worry about checking the app.”  However, what these statements did not disclose was that if the customer,  relying  on Robinhood’s statements,  chose not to close their positions prior to expiration, that their short options could still be assigned (for example by going in the money after hours)—thus resulting in losses. Other misrepresentations were found in  Robinhood’s emails to customers emails during the week that their options contracts expiring, representing that, for short options positions, “[y]ou’ve already set aside the appropriate collateral for assignment.”  This statement was false as well since it failed to account […]

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investment fraud

3 Ways to Recover from Investment Fraud

Jan 20, 2020

Being the victim of investment fraud can be a catastrophic hit to you, your family, and your plans for the future. The money you have worked hard for your entire life can be taken away in an instant. Indeed, one of the best examples of how devastating the impacts of investment fraud can be is the Bernie Madoff case. Bernie Madoff perpetrated a Ponzi scheme that was based on nothing but his charm, his reputation, and the goodwill of his investment firm. As shocking as it may seem, Madoff was able to keep up a billion-dollar investment fraud Ponzi scheme for decades. The red flags were there, but the kind of power he wielded on Wall Street, allowed him to keep suspicion from the Securities and Exchange Commission (SEC) at bay. Once the Great Recession hit, however, Madoff was unable to keep up the façade. And, with surprising calmness, Madoff turned himself in, took responsibility for his massive financial crimes, and stated that he always knew the day would come when the authorities would put him in jail. Devastation from Madoff’s Actions The real tragedy, however, was not Madoff’s descent into the criminal punishment that always awaited him, but the victims left in the wake of his massive fraud. Many believe that Madoff only defrauded investors who either were too wealthy to really be hurt by Madoff’s crimes, or should have known that on some level that he was nothing but a fraudster. That, however, is far from the truth. In fact, many of Madoff’s clients were people of limited means or solidly middle-class individuals. At his sentencing, victim after victim told the court of their poverty solely because of Madoff’s crimes. There was a retired police officer who put all of his life savings into a Madoff account and was left with nothing. There was an elderly gentleman who did not know how he was going to pay for life-saving treatment for his illness without the money he invested with Madoff. And, there are thousands of other stories like that. Investor fraud lawyer Melanie Cherdack understands the plight of those who are victims of investment fraud. She has “seen it all” when it comes to the schemes that investment brokers use to defraud their clients. So, if after reading this article you want to learn more about whether you need an investment fraud lawyer for your current situation, then we invite you to contact us today on our online contact form, or by calling 888-768-2499. We are the investment fraud lawyers who will be leveling the playing field for you. Now, let us get to the 3 ways you can recover investment losses if you were the victim of fraud. 1. Mediation or Arbitration FINRA – the Financial Industry Regulatory Authority – the public/private organization that creates a forum for investors to recover damages from fraud, allows for a number of dispute resolution avenues. To be qualified to use the services of FINRA, the alleged occurrence or event forming the basis of the fraudulent act must have happened within the last six years. If that is the case, then you may want to file an arbitration with FINRA. Compared to going to court, arbitration can be a less costly, easier, and faster option to […]

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