NFL Player's Association Financial Registration Program

Last updated
According to the NFL Players Association, at least 78 players lost a total of more than $42 million between 1999 and 2002 because they trusted money to financial advisers with questionable backgrounds 2011 NFL Draft Class invitees and 2011 NFL Hall of Famers (5668479930).jpg
According to the NFL Players Association, at least 78 players lost a total of more than $42 million between 1999 and 2002 because they trusted money to financial advisers with questionable backgrounds

The NFL Players Association's Financial Advisors Registration Program is a program that will provide NFL players with access to a list of financial advisors who are deemed qualified by the NFLPA. [2] The program was created in 2002 after a series of many investment schemes targeted at professional athletes. It aims to provide an extra layer of protection to athletes to protect them from fraud and poor advice. [3] Advisors must apply to the program and go through a full background check before being added to the list. In October 2019, the NFLPA began inviting financial institutions to register with the program, and currently have partnerships with Goldman Sachs and Bessemer Trust. [4] While players can ultimately choose any investment advisor that they would like to work with, their sports agents can only recommend registered advisors on the list. [3]

Contents

Responsibility of a financial advisor

A financial adviser is a professional who works on behalf of an individual and provides them with advice to help them reach their financial goals. [5] Some of their responsibilities include but are not limited to: understanding the financial markets, creating budgets, saving for retirement, tax planning, and building portfolios. The financial advisors registered in the NFLPA program specifically, have a fiduciary duty to their clients, meaning that legally they must put their clients interests first and represent clients objectively. [6]

Creation

The NFLPA established the Financial Advisors Registration Program in 2002, with the goal of providing players with an extra layer of protection from poor financial advice and from fraud. [3] The NFLPA mentions that the players themselves requested a program like this. [6] Many players come into the league at a young age, are uneducated and inexperienced financially, and therefore, can easily be targeted by scammers. The Financial Advisors Registration Program aims to eliminate this risk, and provide players with advisors and agents who are pre-screened by the NFL.

Registration of a financial firm

As of October 2019, the NFLPA is allowing firms to join their program, on an invite-only basis. Currently, the NFLPA is partnered with Goldman Sachs and Bessemer Trust. [4] The addition of financial institutions to the program will allow for an extra layer of protection for the players. Now, if a player loses money due to an investment scam, the firm behind the advisor will be responsible for recovering the loss. This change comes as there is a possibility of a work stoppage for players after the 2019–2020 season. [4] The NFLPA wants to ensure that players' money will be invested and budgeted well during the potential work stoppage, and throughout the rest of their career into retirement. [4]

Application process for individual advisors

For individual advisors, the initial fee to apply is $2,500. This consists of a $2,000 application fee and $500 for the first year of membership. [6] If the advisor does not get approved to join the list, the $500 membership fee will be refunded. To apply for the program, an advisor must have a number of qualifications; these include but are not limited to:

Application Qualifications [6]
1Bachelor's degree from an accredited university.
2Every Applicant shall be a CERTIFIED FINANCIAL PLANNER™ (CFP®) and/or a Chartered Financial Analyst® (CFA). An individual who is currently a Registered Player Financial Advisor, but is not a CFP® or CFA must become compliant within three years of implementation of this Regulation, which is November 1, 2017.
3Minimum of eight (8) years of licensed experience (qualifying licenses include FINRA series licenses, Attorney, CPA or an insurance license).
4Fidelity bonding and professional liability insurance coverage as indicated in Section Two II D of the Regulations.
5No civil, criminal or regulatory history related to fraud.
6No pending customer complaints or litigation at the time of application.
7Must not maintain custody of player funds unless deemed a qualified custodian

History of fraud in the NFL

Between 1999 and 2002, at least 78 NFL players had been defrauded of more than $42 million. [7] This loss was a total of many investment schemes intended to target misinformed athletes. The goal of the NFL's Financial Advisors Registration Program is to protect players from these schemes, but there are still cases involving advisors defrauding professional athletes.

Kirk Wright

Wright, a hedge fund manager, was an approved advisor on the NFL's list. He hired an ex-NFL player as a consultant to his firm, and used him as a means to attract NFL players as clients. [7] When his business collapsed, Wright was charged and convicted of 47 counts of fraud and money laundering. Wright gave clients statement which showed that their investments were worth up to 1000 times more than their real value. [8] Seven NFL players who were involved in this scheme lost about $20 million.

Jeff Rubin

Rubin was one of the largest financial advisors in the NFL, with at least 45 players as clients. [9] He was soon trusted amongst athletes when he saved them from a Ponzi scheme involving a former NFL agent, William "Tank" Black. [9] Rubin's fall came when he advised clients to invest in a new casino establishment in Alabama, but when electronic bingo was later deemed illegal by the state of Alabama, the casino got raided and shut down. [10] Through this investment, his clients lost a total of $43 million. [10] Rubin was a registered advisor on the NFLPA financial advisors program, but noted that they never contacted him regarding the investments he had his clients in. [10]

Jinesh "Hodge" Brahmbhatt

Brahmbhatt was a registered financial advisor with the NFLPA and ran his own company, Jade Wealth Management, where he had many clients who were NFL and NBA players. [11] He had more than 30 of his clients invest in a company called Success Trade Securities (STS). STS was an online trading company where the CEO was later accused of running a Ponzi scheme; he would use newly issued promissory notes to pay off interest on older notes issued. The FINRA report accused Jade Wealth Management of recommending STS to athletes, and in turn, Jade received $1.25 million from STS over a few years. Brahmbhatt admitted that his clients invested more than $12 million in fraud notes from STS. After failing to provide the NFLPA with information on his role in the alleged fraudulent activities, the NFLPA removed him from their financial advisors program.

Related Research Articles

<span class="mw-page-title-main">Ponzi scheme</span> Type of financial fraud

A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, this type of scheme misleads investors by either falsely suggesting that profits are derived from legitimate business activities, or by exaggerating the extent and profitability of the legitimate business activities, leveraging new investments to fabricate or supplement these profits. A Ponzi scheme can maintain the illusion of a sustainable business as long as investors continue to contribute new funds, and as long as most of the investors do not demand full repayment or lose faith in the non-existent assets they are purported to own.

<span class="mw-page-title-main">U.S. Securities and Exchange Commission</span> Government agency overseeing stock changes

The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market manipulation.

The 2003 mutual fund scandal was the result of the discovery of illegal late trading and market timing practices on the part of certain hedge fund and mutual fund companies.

<span class="mw-page-title-main">Goldman Sachs</span> American investment bank

The Goldman Sachs Group, Inc. is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered in Lower Manhattan in New York City, with regional headquarters in many international financial centers. Goldman Sachs is the second largest investment bank in the world by revenue and is ranked 55th on the Fortune 500 list of the largest United States corporations by total revenue. In Forbes Global 2000 2023, Goldman Sachs ranked 34th. It is considered a systemically important financial institution by the Financial Stability Board.

<span class="mw-page-title-main">MMM (Ponzi scheme company)</span> 1990s Russian Ponzi scheme company

МММ was a Russian company that perpetrated one of the world's largest Ponzi schemes of all time, in the 1990s. By different estimates from 5 to 10 million people lost their savings. According to contemporary Western press reports, most investors were aware of the fraudulent nature of the scheme, but still hoped to profit from it by withdrawing money before it collapsed.

Reed Eliot Slatkin was an initial investor and co-founder of EarthLink and the perpetrator of one of the largest Ponzi schemes in the United States since that conducted by Charles Ponzi himself.

A high-yield investment program (HYIP) is a type of Ponzi scheme, an investment scam that promises unsustainably high return on investment by paying previous investors with the money invested by new investors.

Affinity fraud is a form of investment fraud in which the fraudster preys upon members of identifiable groups, such as religious or ethnic communities, language minorities, the elderly, or professional groups. The fraudsters who promote affinity scams frequently are – or successfully pretend to be – members of the group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme, by convincing those people that a fraudulent investment is legitimate and worthwhile. Many times, those leaders become unwitting victims of the fraudster's ruse.

<span class="mw-page-title-main">Financial adviser</span> Professional who renders financial services to clients

A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory body in order to provide advice.

William H. "Tank" Black Jr. is a former sports agent. Black was an assistant coach for the University of South Carolina Gamecocks before starting his Columbia, South Carolina-based sports agency, Professional Management Incorporated (PMI) in 1988. His first client was former Gamecocks wide receiver Sterling Sharpe, a first-round draft pick by the Green Bay Packers in 1988.

<span class="mw-page-title-main">Madoff investment scandal</span> Investment scandal discovered in 2008

The Madoff investment scandal was a major case of stock and securities fraud discovered in late 2008. In December of that year, Bernie Madoff, the former Nasdaq chairman and founder of the Wall Street firm Bernard L. Madoff Investment Securities LLC, admitted that the wealth management arm of his business was an elaborate multi-billion-dollar Ponzi scheme.

Bertram Earl Jones is a Canadian unlicensed investment adviser who pleaded guilty to running a Ponzi scheme that CBC News has reported cost his victims "a conservative estimate of about $51.3 million taken between 1982 and 2009". After pleading guilty to two charges of fraud in 2010, he was sentenced to 11 years in prison. After serving four years of his sentence, Jones was released on March 20, 2014.

<span class="mw-page-title-main">Byron Trott</span> American merchant banker

Byron David Trott is the founder, chairman and co-CEO of BDT & MSD Partners, a merchant bank that provides advice and capital to family and founder-led companies. Formerly, Trott was vice chairman of Investment Banking at Goldman Sachs.

Betterment is an American financial advisory company which provides digital investment, retirement and cash management services.

International Investment Group (IIG) is an American financial institution that specializes in short-term trade finance and commercial finance with a focus on emerging markets. Through its affiliate IIG Capital it provides financing to small and medium-sized merchants, traders and processors with a need for supply chain financing.

A commodity trading advisor (CTA) is US financial regulatory term for an individual or organization who is retained by a fund or individual client to provide advice and services related to trading in futures contracts, commodity options and/or swaps. They are responsible for the trading within managed futures accounts. The definition of CTA may also apply to investment advisors for hedge funds and private funds including mutual funds and exchange-traded funds in certain cases. CTAs are generally regulated by the United States federal government through registration with the Commodity Futures Trading Commission (CFTC) and membership of the National Futures Association (NFA).

Goldman Sachs Personal Financial Management (GSPFM) was a former division of Goldman Sachs responsible for wealth management of high-net-worth individuals. It had 74 offices in the United States and managed $25 billion in assets.

Ezubao was a peer-to-peer lending scheme based in the eastern Chinese province of Anhui. It was set up as an online scheme in July 2014, attracted funds of about 50 billion yuan from 900,000 investors, and ceased to trade in December 2015. On 1 February 2016, the scheme was closed down and 21 involved people were arrested. Zhang Min, the president of the parent company, Yucheng Global, told investigators that the company operated as a Ponzi scheme. Following its establishment, Ezubao grew rapidly, masquerading as a legitimate investment opportunity while operating under the guise of peer-to-peer lending. Revelations about the fraudulent nature of Ezubao’s operations emerged after an exposé in late 2015, leading to public outcry and intensified scrutiny by regulatory authorities. The scale of Ezubao’s Ponzi scheme, which orchestrated a sophisticated ruse involving fake projects and returns, was unprecedented in China, contributing to an estimated loss of billions of yuan for investors. The scandal not only devastated the finances of nearly a million individuals but also prompted a nationwide tightening of regulations on the peer-to-peer lending industry, aiming to close loopholes and restore investor confidence.

References

  1. ↑ Torre, Pablo S. "How (and why) athletes go broke." Sports Illustrated 23 (2009): 23-35.
  2. ↑ "NFL Players Association - Financial Advisors Application and Renewal". www.nflpa.com. Retrieved 2019-10-17.
  3. 1 2 3 "NFL Players Association - Financial Advisor Frequently Asked Questions". www.nflpa.com. Retrieved 2019-11-21.
  4. 1 2 3 4 "NFLPA Brings in Goldman Sachs as a Registered Financial Advisor – SPORTS AGENT BLOG" . Retrieved 2019-10-28.
  5. ↑ "Financial Advisor - Overview, Roles and Responsibilities, Salaries". Corporate Finance Institute. Retrieved 2019-10-17.
  6. 1 2 3 4 "NFL Players Association Regulations and Code of Conduct" (PDF). nflpaweb.
  7. 1 2 Landsman, Laurence. "Financial Fraud Is One of the Biggest Off- Field Challenges to NFL Players" (PDF). law.marquette.edu.
  8. ↑ Horowitz, Carl (2008-06-16). "Atlanta Hedge Fund Manager Found Guilty, Kills Self". National Legal & Policy Center. Retrieved 2019-10-17.
  9. 1 2 "Raucous lifestyle leads to fall of Jeff Rubin, former financial adviser to NFL players". www.yahoo.com. Retrieved 2019-10-28.
  10. 1 2 3 "NFL players lost $43M on his financial advice". www.cbsnews.com. Retrieved 2019-10-28.
  11. ↑ Goodman, Andrew. "The Ponzi Scheme You've Never Heard Of That Cost NFL, NBA Players Millions". Forbes. Retrieved 2019-10-28.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.