An irreverent Wall Street Blog
by Bill Singer
 
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

FINRA Arbitrators Say Public Customer Claimant Grossly Misled Wachovia
Written: April 25, 2012

Unbalanced scales

In a Financial Industry Regulatory Authority (“FINRA”) ArbitrationStatement of Claim filed in June 2010, Claimant asserted causes of action including breaches of fiduciary duty and contract; fraud; and negligence in connection with purchases of unspecified securities and call options. Claimant sought about $300,000 in compensatory damages, punitive damages, interest, attorneys’ fee, and costs. In the Matter of the FINRA Arbitration Between Chris Stapleton and Soha Stapleton for SIG Real Estate Holdings, Inc., Claimant, v. Wachovia Securities Financial Network, LLC n/k/a Wells Fargo Advisors Financial Network, LLC, Respondent (FINRA 10-02756, April 23, 2012).

Respondent generally denied the allegations, asserted various affirmative defenses, and sought the expungement of this matter from non-party Paul Manfrey’s Central Registration Depository record.

In March 2012, the parties resolved the matter and, thereafter, the FINRA Arbitration Panel heard Manfrey’s request for expungement, which was not opposed by the Claimant (who did not appear at the expungement hearing.) Pointedly, Claimant had acknowledged in the settlement agreement that “Mr. Manfrey has a valid basis for seeking to remove this matter from his record…”

In recommending expungement, the FINRA Arbitration Panel noted the following:

Claimant was not a naive investor but in fact was very active and highly involved in all aspects, including extensive internet day trading from his home, independent research, study for his own securities licenses, and numerous phone and in-person conversations with Mr. Manfrey.

Claimant grossly misled Respondent, among others, with the extent of his net worth. Respondent had every reason to believe that Claimant’s accounts represented less than 5% of his assets and Claimant demonstrated repeatedly the life style to support this conclusion.

Claimant’s assertions about conservative investment objectives and signing blank forms are not supported by the documentary evidence or verbal testimony.

Bill Singer’s Comment

No, not an earth-shattering case or one involving particularly unique issues.  It seems to be a fairly common garden variety customer dispute.  What does make this worth reporting about is the FINRA Arbitration Panel’s slap in the Claimant’s face and it’s decision to recommend the expungement of the non-party broker’s record.

Many brokerage firms and registered persons regularly find themselves named in public customer arbitrations. Frequently — no, not always and probably not in the majority of cases either — there’s more than bit of fancy and truth-stretching involved in making the customer’s case. If I were an employee of Wells Fargo, Citigroup, Merrill Lynch, JP Morgan, Morgan Stanley, UBS, or any major firm, I’d demand a zealous defense of my good name and a demand for expungement of my record.  Similarly, I’d also like to see a more frequent resort to counterclaims against abusive customer complaints.

Without question non-party Manfrey was victimized here by having his name dragged through an arbitration in which he was not named as a Respondent and, as such, denied a meaningful opportunity to defend himself. The Panel’s dismissive commentary about the Claimant should serve to restore this broker’s good name and reputation.

Of course, on the other side of this coin, the public customer’s Bar will argue that where there’s smoke there’s often fire. Such a point would not be well made in this case, particularly in light of the Panel’s comment. However, in general, the Claimants’ bar would be correct in urging us to not be too quick to close our eyes to the years of customer abuse and disservice that prompted the current rash of lawsuits against many industry brokerage firms.  And when it comes to pointing a finger about parties in arbitration who stretch the truth to serve their needs, the industry is a skilled practitioner. Moreover, let also not forget the toxic stew of exotic securities cooked up by folks looking to dump product on unsuspecting investors. This is a bed that Wall Street made.  Even if a given individual broker’s conduct in servicing a customer is beyond reproach, that doesn’t mean the the products that were sold to the client were ultimately suitable or free of taint (consider the Auction Rate Securities or collateralized debt cases as an example).

UPDATE: For my view on the difficulties faced by unnamed stockbrokers in FINRA customer arbitrations, see these “Street Sweeper” columns:

Unnamed UBS brokers Win FINRA Arbitration Expungement(June 2, 2011)

Citigroup Stockbroker Wins Expungement Even Though Customer Was Paid a Settlement (November 9, 2011)

Unnamed FINRA Arbitration Respondent Seeks Vindication(January 27, 2011)


 
[^top^]

Previous Entries
July 3, 2015
On Sunday July 5th, Greeks will be going to the polls -- at least as of the writing of this column -- and voting whether to accept the terms of the pr... Read On
July 2, 2015
Offered for your consideration today in the BrokeAndBroker.com Blog is a thought piece. On one side, we have the goose: An individual human being conv... Read On
July 1, 2015
If you're going to promise a Wall Street regulator that you will fix a problem, you better make certain -- in fact, you better make damn cer... Read On
June 30, 2015
In "SEC Commissioner Gallagher Rages Against The Dying Light In Two Dissents" (BrokeAndBroker.com, June 18, 2015), I noted that:After four years ... Read On
June 30, 2015
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page BrokeAndBroker.com Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS: Brok... Read On
June 29, 2015
On June 26, 2015, the Financial Industry Regulatory Authority ("FINRA") published this somewhat unusual and intriguing press release:FINRA Supports NA... Read On
June 27, 2015
BREAKING NEWS: Supreme Court Rules On Gay MarriageIn Obergefell et al. v. Hodges, Director, Ohio Department Of Health, et. al (Slip Opinion,... Read On
BrokeAndBroker.com Job Search


Related Topics
Tag Cloud
Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Brokeandbroker.com Morgan Keegan Arbitration Counterclaim BrokeAndBroker.com Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC RRBDLAW.com Ponzi Affinity Fraud Wachovia Criminal Raymond James BrokeandBroker.com Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX BrokerAndBroker.com FBI Banc of America Pro Se PCAOB Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax RRBDlaw.com Email Netschi Moore Whistleblower Street Sweeper Countrywide Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade AIG Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw 8210 Appeal Fowler LPL Johnson Cellphone US Airways JPM BrokeandBroker Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Fifth Amendment Forex Mortgage Private Placement Moon CGMI Failure to Supervise Merrill Anderson Exam Lee Borrowing Tax Lien Charity Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Deferred Compensation RIA Prison Disclosure NASAA Aguilar FCPA Subway Testimony Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital Retirement Due Process God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Compliance Audit Test Examination Cheating Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Series 7 Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud OBA Equity Indexed Annuities EIA Disability MetLife Continuing Education OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Password Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Obamacare Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Practice Sale Unfair Competition Signature Judgments Data Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Commodities Fraud Sexist NML Argentina Embezzlement Silver Investor Alert Evidence Judgment Bank Fraud Deceased Bill Singer BrokeAndBroker TSSB OHO Leveraged ETF Mary Jo White Trustee FINRA AWC Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Commissioner Stein 401(k) Rule 3040 Customer Files Class Action Beneficiary NYAG Schneiderman 11th Circuit Insurance Gallagher White Self Regulation Short Sale Compromise Website Rule 2010 Check TRO Supervision Vacatur Remand SDNY Rule 12206 BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information Reg SP VA Leveraged ETFs Regulation SP Fees Cease And Desist Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Red Flags Payroll Stockbrokers ALJ Cybercrime Loans BrokerCheck Altered Records
 
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+