McGinn Smith and National Financial Services, LLC

Response: When you opened an account with McGinn Smith, you signed an agreement that included an “arbitration clause.” These clauses typically provide that any dispute a client has with his or her financial advisor, the brokerage firm and/or the clearing firm servicing the accounts must be submitted to arbitration. The majority of the arbitrations subject to arbitration clauses in these types of cases are conducted through the Financial Industry Regulatory Authority (“FINRA”), the largest securities dispute resolution forum in the world. The attorneys at the Blum Law Group have extensive experience litigating arbitration claims through FINRA.

Response: Many, but not all, customers of McGinn Smith were also customers of National Financial Services (starting in late 2005). Those McGinn Smith customers who received account statements from McGinn Smith on a regular basis were also customers of National Financial Services, as the clearing firm for McGinn Smith. As such, National Financial Services owed its customers certain duties relating to McGinn Smith and the investments made. As we have alleged in an arbitration claim, National Financial Services breached those duties which resulted in monetary losses to you and other investors.

Response: No. Blum Law Group (the “Firm”) will handle your case on a contingency fee and will advance the costs and expenses of bringing and litigating your case. The fee is “contingent” because the Firm is paid only if it is successful in recovering money for you. If the Firm does not recover any money, you do not have to pay anything for the time and efforts of the attorneys working on your case. Likewise, if there is no recovery, then you do not have to reimburse the Firm for the costs and expenses it incurred in bringing and litigating your case. However, if the Firm does recover money, then it will retain and deduct the attorneys’ fees and costs/expenses prior to the disbursement of the funds.

Response: No. The SEC has placed McGinn Smith in receivership. A receiver has been appointed to gather and sell off all of the assets of the company with the hopes of returning any money left over to investors after paying certain liabilities, costs and expenses of McGinn Smith and incurred by the receiver. The only way an individual pursuing claims against National Financial Services will be prevented from recovering any money from the receivership, or any other action, is if he or she receives back all of the money invested through the action filed against National Financial Services.

Response: SIPC stands for the “Securities Investor Protection Corporation” (“SIPC”) which was created in 1970 to protect customers of member brokerage firms that may fail or be liquidated. If any securities or cash are missing from eligible customer accounts, SIPC steps in to replace those securities and cash. This protection is currently limited to $500,000 per customer, including a maximum of $250,000 for cash claims. SIPC is not the equivalent of the FDIC (the Federal Deposit Insurance Corporation) as it does not provide blanket coverage for investment losses like the FDIC does for member banks that fail or are taken over due to financial hardships.

The SEC has the power to file an application in federal district court to require SIPC to initiate a liquidation proceeding to protect customers of an insolvent brokerage firm. If the Board of Directors of SIPC fails to take such action, the SEC can compel SIPC to bring liquidation proceedings. According to the documents filed in the receivership, the SEC is investigating whether it will file such an application, but to date has not yet filed. Even if the SEC files the application, investors should not delay the filing of an arbitration claim since there are time limitations in the ability to bring such claims. Also, the arbitration proceeding would be a parallel proceeding meaning it can proceed independently from other possible actions being taken by the SEC or SIPC.

Response: No. The only way an individual pursuing claims against National Financial Services would be prevented from recovering any money from SIPC should it apply is if he or she receives back all of the money invested through McGinn Smith though the action against National Financial Services.

Response: FINRA arbitrations typically take between twelve (12) to fourteen (14) months to complete through what is known as final hearings. For customers over the age of 65 with medical conditions that require the matter to be heard faster, FINRA has expressed an intention to have arbitrators handled these cases on an expedited basis--therefore these cases may be resolved in less than twelve months.

Arbitration cases are typically resolved faster than court cases. A large number of arbitration cases settle prior to the final hearings directly by the parties involved or through mediation.