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Stephen Steinlight

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Stephen Steinlight has nearly two decades of experience as a trial and appellate litigator in federal and state courts and arbitrations in an expansive range of complex business, commercial, corporate, real estate, banking, financial services, consumer finance, securities industry/broker-dealer, white-collar/regulatory, ERISA, and labor and employment matters.

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We are pleased to share our annual review of regulatory and legal developments in the consumer financial services industry. With active federal and state legislatures, consumer financial services providers faced a challenging 2023. Courts across the country issued rulings that will have immediate and lasting impacts on the industry. Our team of more than 140 professionals has prepared this concise, yet thorough analysis of the most important issues and trends throughout our industry. We not only examined what happened in 2023, but also what to expect — and how to prepare — for the months ahead.

Mindful of the impending retirement of many millions of investors in the “baby boomer” generation, which hold a substantial amount of the world’s wealth, the Financial Industry Regulatory Authority (FINRA) continues to heavily monitor its member firms supervision of their registered financial advisors who service vulnerable and elderly investor customers. For example, last month FINRA suspended a former David Lerner Associates (DLA) branch manager for failing to properly supervise sales of interests in two illiquid oil and gas limited partnerships. The suspended manager at issue approved these transactions, which carried a high degree of risk, to some senior investors with insufficient tolerance for risk. Ultimately, FINRA concluded that the supervising branch manager failed to “conduct a reasonable analysis” of the suitability of those investments for the elderly customers or within 30 days of their risk tolerance increasing.

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As any Wall Street litigator knows, in the securities industry, it is typical for brokerage firms to incentivize their employed financial advisers with significant upfront compensation at the beginning of a relationship or even at the beginning of each new financial year. These up-front payments are often structured as “forgivable loans” and memorialized in promissory notes. However, if the employment relationship ends prematurely or the financial advisor fails to meet certain objectives and obligations such as revenue goals, repayment obligations can be triggered. Not surprisingly, litigation stemming from these promissory notes is commonplace before the Financial Industry Regulatory Authority (FINRA) in its arbitral forum, and these arbitrations only increase in volume as we step into more turbulent economic times when layoffs and resignations become commonplace in the industry.