Our Next Radio Show

Tune in tomorrow at 11:30 a.m. to 101.5 WORD-FM to hear Michele Conti discuss the “Top 10” things to consider and plan for to make your loved ones lives easier upon your passing.

The Alternative Option for Expunging CRD Records

It is incorrect for financial advisors to assume that the expunging of disclosure events from their Central Registration Depository ("CRD") records can only happen at the conclusion of an arbitration and only if the panel finds (a) that the customer's claims, allegations, or information is factually impossible or clearly erroneous, (b) that the advisors were not involved in the alleged misconduct, and/or (c) that the claim, allegation, or information is false. To the contrary, an alternative and independent route exists through the courts. Moreover, with a standard developing that courts can use when determining whether or not to grant expungement, courts are particularly well suited for expunging disclosure events (a) that are years, sometimes decades, old or (b) in situations where an arbitration panel has not made any findings of falsity or non-involvement as mentioned above.

Such a standard for the courts is necessary because FINRA's Rule 2080 governing expungements is surprisingly silent on how courts should go about determining whether or not to grant an expungement. See Reinking v. FINRA, 2011 U.S. Dist. LEXIS 5611 (W.D. Tx. 2011) and Bridge v. E*Trade, 2012 U.S. Dist. LEXIS 110693 (N.D. Ca. 2012). Indeed, as the Reinking court observed, the majority of Rule 2080's focus is on the standard to be used when determining whether or not FINRA may waive the obligation to be named as a party to the court proceedings. Reinking at *9. This is not, as Reinking observes, the standard courts are to use, or should use, when deciding to grant expungement as it is too exacting for a merits determination, since its purpose is to govern when FINRA will oppose an expungement not whether expungement should ultimately be granted. Reinking at *12.

Consequently, Reinking looked for guidance from the SEC's commentary on Rule 2080's predecessor, NASD Rule 2130. That commentary emphasizes striking the appropriate balance between the ability to remove information from the CRD that holds no regulatory value, while simultaneously preserving information in CRD that is valuable to investors and regulators. Reinking at *11. Accordingly, Reinking held that it too should weigh the regulatory value of the information to be expunged when weighing whether or not to grant expungement.

This Reinking standard, subsequently adopted and endorsed by Bridge, is also in keeping with other existing legal tenets that balance an individual's rights against society's interests, such as those governing the expungement of a criminal record wherein the harm to the individual must be balanced against the government's interest in preserving such records. cfn. Com. v. Wexler, 431 A2d 877 (Pa. 1981).

Practically speaking, and unlike the balance of Rule 2080, it allows a court to decide in a fair and balanced manner the oftentimes critical question - how long is too long for an event to remain an advisor's CRD report when the value of a prior event for investors and regulators arguably diminishes with each additional year. Accordingly, the Reinking standard allows a court to properly weigh an advisor's desire to remove a disclosure event that is behind them and to which they have responded with positive changes in practice against the regulatory value of keeping that same event in the CRD.

Consequently, expungement through the courts is possible thanks to Reinking's guidance.

This material is for informational purposes only. It is not and should not be solely relied on as legal advice in dealing with any specific situation.

Welcome to Katie Kenyon & Michael Monyok

Welcome to Katie Kenyon & Michael Monyok!

Katie joins the firm as a partner in the Litigation & Dispute Resolution and Employment Law & Benefits Groups. Here is the Pittsburgh Post-Gazette announcement.

Michael is a member of the firm’s Intellectual Property, Corporate & Business Law, and Litigation & Dispute Resolution Groups. Here is the Pittsburgh Business Times announcement.

Mergers, Purchases Need Cybersecurity Due Diligence

Patricia Farrell’s article “Mergers, Purchases Need Cybersecurity Due Diligence” recently appeared in the Pittsburgh Post-Gazette. You can access the online version using this link.

Next Radio Show

Tune in tomorrow at 11:30 a.m. to 101.5 WORD-FM to hear Michele Conti discuss the importance of planning ahead, both financially and legally speaking, and the major pitfalls that await if you don’t.

New Affordable Care Act FAQs

Jason Mettley

On Friday, November 7, 2014,  Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) issued new FAQs regarding the Affordable Care Act.

Most noteworthy, the Departments state that if an employer has an arrangement with its employees whereby the employer reimburses employees for the cost of an individual health insurance policy, that arrangement constitutes a "group health plan" for purposes of ERISA and the Code.  As a group health plan, the arrangement would not comply with the market reforms under the ACA thereby triggering penalties and excise taxes.  According to the Departments, the arrangement is a group health plan.  This would mean that the arrangement is also subject to all of the applicable requirements of ERISA (e.g., the need to have a written instrument, the need to file annual returns, etc.).

Employers should consult with their lawyer before eliminating any group health insurance policy.  It is critical to review the reasons for eliminating any existing policies and understand what the employer intends to do to replace the group health insurance.  There could be ramifications to the employer, including  fines and penalties, depending on what the employer is intending to do moving forward.

You can read the FAQs issued here.  Please contact Jason Mettley or any other Meyer, Unkovic & Scott LLP attorney with whom you have worked to discuss any questions you may have on the Affordable Care Act.

This material is for informational purposes only. It is not and should not be solely relied on as legal advice in dealing with any specific situation.

2015 Best Lawyers in America

Best Lawyers in America has named 21 Meyer, Unkovic & Scott attorneys as among the best lawyers in their practice areas across the country. You can read this article, "2015 Best Lawyers in America", to see which attorneys were named as Best Lawyers.

Your Personal Estate Plan

Tune in tomorrow at 11:30 a.m. to 101.5 WORD-FM. Michele Conti will continue the discussion about why it is so important to have an open dialogue with your family about your personal estate plan documents and wishes. Her guest on the show will be Julia Kramer who is a Financial Literacy Educator and Financial Coach.

Amendments To Pennsylvania Mechanics' Lien Law

James R. Mall

On October 14, 2014, Governor Corbett signed into law a bill amending the Pennsylvania Mechanics' Lien Law which is designed to provide additional protections to commercial and residential property owners when general contractors fail to pay their subcontractors.

The new law will create a centralized construction notice registry in Pennsylvania known as the State Construction Notices Directory ("Directory"). The Directory will be an internet-based database providing extensive details of each registered construction project. The Directory is to be maintained by the Pennsylvania Department of General Services and provides that the DGS is to have this website operational by December 31, 2016. An owner would then have the option of registering a project by filing a "Notice of Commencement" on the Directory website and posting a copy at the site of the project prior to the start of physical construction. This Notice must be filed before any labor, work or materials are furnished on the project. Further, this Notice gives any subcontractor who wishes to be protected against non-payment by a general contractor, the opportunity to let the property owner know that he or she is performing work on the project. This subcontractor accomplishes this by filing a "Notice of Furnishing" with the Directory within 45 days after first supplying labor or materials at the project site. This enables the property owner to ensure all subcontractors are paid before the owner makes final payment to the general contractor. The Act provides a form for completing the Notice of Furnishing and provides that the subcontractor must comply with the statutory notice requirements or lose its lien rights. Once a party files a Notice with the Directory, it will receive future notices of any subsequent filings on that particular project.

The new law places a duty on the subcontractor to vigilantly monitor notices of commencement and file timely notices of furnishing before starting work to avoid forfeiting lien claim rights. The law makes it unlawful for a general contractor to require a subcontractor to refrain from filing a Notice of Furnishing as a condition to entering into a contract to furnish labor or materials on a particular project. Criminal sanctions are also provided for under the statute, as well as providing subcontractors the right to file a civil suit to recover actual damages, plus costs and attorneys' fees, against anyone dissuading a subcontractor from not filing a Notice of Furnishing in order to secure work on a project. Lien rights are also preserved should this unlawful activity occur by a general contractor.

The Notice Requirements of the Act only apply to projects commenced on or after the operational date of the Directory which is currently set at December 31, 2016. While the Notice Requirements will significantly impact current lien filing procedures, its purpose is to provide owners with the identity of the universe of subcontractors working on a project. It is designed to enable a general contractor to make sure that all subcontractors have been paid in full before making final payment on the project, as well as protecting property owners from having to pay subcontractors twice for the same work.

Questions concerning the new statute can be directed to James R. Mall at jrm@muslaw.com or 412-456-2832.

This material is for informational purposes only. It is not and should not be solely relied on as legal advice in dealing with any specific situation.

What's In Your Client Agreements?

Why Financial Planners Need to Effectively
Communicate, in Writing, to Clients, and How to Do it.

When working with clients, it is often easy to overlook some simple, yet very important, standards that every financial planner should follow. CFP and FINRA rules protect financial planners from liability to clients who find themselves dissatisfied for a number of reasons, including because they closely follow the relevant legal standards. Accordingly, complying with them should be considered standard practice when communicating with clients both at the outset and when necessary during the client-advisor relationship. Taking the time to review your practices involving client communications is an important step towards protecting yourself from potential lawsuits. When doing so, there are some points to consider:

1. Advisors are Fiduciaries under the law.

• But the duties owed to the client depend on the nature of the client relationship;
• At a minimum, advisors owe a duty to give the client information which is relevant to the affairs entrusted to the advisor;
• Which the advisor has notice of;
• Which the client would desire to have; and
• Which can be communicated without violating a superior duty to a third person.

2. Under some circumstances, and with some clients, follow-up communications may be necessary. 

• First, doing so creates a clear written record that the risks of the investment were disclosed to the client.
• Second, the clearer the record of disclosure, the easier it is to argue that the client ratified the transaction and/or is estopped from arguing that it is not suitable.
• Third, clear disclosures trigger the client's duty to mitigate their damages, since the test is whether a client's actions and inactions are reasonable considering all the facts and circumstances.
• Fourth, commentary to FINRA Rule 2111 allows for the use of a risk-based approach. However, the more complex an investment is in structure, performance, and risks involved, the greater the need to document suitability on a transactional basis.
• Finally, regardless of whether or not advisors have an on-going duty to advise the client, they may nevertheless need to provide subsequent corrective advice about an earlier recommendation.

3. Final Thoughts. 

• Clear and unambiguous communication with clients is key to avoiding being sued.
• The written communication is your best ally because it memorializes and preserves the record.
• While it is necessary to communicate, in writing, with all clients about the scope of work you will perform at the outset of the relationship, with some clients it is best to send them written communications throughout the relationship in order to avoid confusion on their part about their investments, especially the risks. This will help you to create and preserve a clear written record if needed later in time.

While it may seem that communications with clients are only important during the original engagement in order to the scope of engagement, there are times, clients, and circumstances that makes it essential to document clear communication set forth at other points throughout the relationship. Clear and concise communications will not only protect you from any potential future claim a client may make, but also leave a clear record of all activities you have performed and the intent of your actions. Armed with this documented and chronicled information, you can protect yourself from aggravating and potentially damaging legal repercussions.

This material is for informational purposes only. It is not and should not be solely relied on as legal advice in dealing with any specific situation.