Brokers should never allow or ask a client to sign an account opening document in blank, with the information to be completed at a later time.  Despite this, brokers sometimes do so, reasoning the practice is more convenient for clients (and brokers) and saves time.

Allowing client documents to be signed in blank can expose you to claims that can easily be avoided. Examples of risks associated with having clients sign documents that are not fully completed include:

Control Over the Clients’ Financial Affairs

Allowing account forms to be signed in blank leaves you in sole control of the content, thus exposing yourself to a claim that the client relied on your discretion and professional judgment in managing his or her accounts.  The more control you possess, the greater your duties to your client.

Unfortunately, seniors are falling victim to unfair, deceptive or abusive financial practices. According to a recent survey conducted by the Certified Financial Planner Board (“CFP”), the problem of senior investors being subjected to unfair, deceptive or abusive financial practices is pervasive.  According to the survey, seniors who fall victim to financial abuse lose an average of $140,500

Over half of the financial planners surveyed admitted to working with seniors who have fallen victim to various types of financial abuse, including misleading marketing schemes and other financial scams taking advantage of senior investors.

Common scams targeting senior investors include:

• Free lunches – One of the most common scams targeting senior investors is the “free lunch” seminar.  These seminars are presented as educational presentations that offer a free meal during the seminar.  According to the CFP Board, these “seminars” are often nothing more than a ploy to pitch investment products tied to misleading senior investors.

• Big cash prizes – In these scams, seniors are told they have won a big prize, such as money or a trip, and are required to give credit card or bank account information to pay for extra fees associated with the bogus prize.  After receiving the account information, the scammer steals the identity and finances of the victim.

• High-yield investments – Of the 2,649 financial planners surveyed by the CFP Board, 50 percent said they know of seniors receiving unsolicited pitches for financial products and services.  These pitches are often delivered by mail, email, or a phone call and include supposedly low-cost, high-yield investments. 

As an attorney, you might assume you are exempt from being duped by fraudsters.  However, some fraudsters are extremely intelligent and contriving and spend a great deal of time and effort developing a believable story, fully supported by false, but facially legitimate looking, documents.

In a new fraud trend called “commercial debt collection fraud”, fraudsters seek to retain a law firm on a fabricated legal matter in order to run a counterfeit check or bank draft through the firm’s trust account, and then take the actual money.  The initial contact and follow up documentation often look real.   Once the law firm tries to complete the transfer, however, a shortage of money in the trust account becomes apparent.

According to the Financial Industry Regulatory Authority (“FINRA”), purchases of securities “on margin” (using funds borrowed from the investor’s brokerage firm) average more than $320 billion per month.  This tremendous volume of trading on margin caused FINRA recently to reissue an Investor Alert warning investors of the risks of trading securities on margin.  Before trading on margin, or even opening a margin account, it is important to understand the risks of trading on margin and the dynamics how margin accounts operate.  Margin accounts allow investors to borrow money from their brokerage firms and use that money to purchase securities.  The borrowed funds allow investors to purchase more securities than they otherwise could using their own cash.  However, the investor is paying interest on the borrowed funds, which adds costs to the securities transactions, and any losses are multiplied, potentially beyond the investor’s available cash because the investor is using borrowed money.