In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in June 2010, Claimant Kulekofsky asserted causes of action including negligence and breaches of implied contract and of fiduciary duty as a result of allegedly unauthorized withdrawals by his spouse from his IRA account. Claimant sought damages of:
- $741,103.00 (includes $76,103.00 tax liability) from Respondents Advest Inc., Mark Bilski and Melanie Clish, jointly and severally;
- $372,915.00 (includes $63,074.00 tax liability) from Respondents Credit Suisse (USA) LLC, Mark Bilski and Melanie Clish, jointly and severally; and
- interest, costs; and attorneys' fees.
In the Matter of the FINRA Arbitration Between Louis Kulekofsky, individually and as Trustee of his IRA, Claimant, vs. Advest, Inc. (n/k/a Merrill Lynch Pierce Fenner & Smith, Inc.), Credit Suisse Securities (USA) LLC, Mark Bilski, and Melanie Clish, Respondents (FINRA Arbitration 10-03065, August 21, 2012).
Respondents generally denied the allegations and asserted various affirmative defenses. Respondents requested the expungement of the matter from Respondents Bilski's and Clish's Central Registration Depository records ("CRD").
Claimant notified FINRA that he had dismissed with prejudice his claims against:
- Advest: December 1, 2011;
- Bilski and Clish: November 16, 2011.
- Credit Suisse: May 11, 2012
On or about June 19, 2012, Respondents Bilski and Clish moved to expunge the customer complaint from their CRD records. The FINRA Arbitration Panel recommended the expungements for the following reasons as stated in the Decision:
1. Claimant dismissed with prejudice Respondents Bilski and Clish on November 16, 2011. This was prior to mediation and settlement agreements entered into by Respondents Advest Inc. (on November 21, 2011) and Credit Suisse Securities (USA) LLC (April 19, 2012)
. . .
4. The following are some of the Panel's findings under Rule 2080 as grounds for the expungement
a. There were no investment-related sales practice violations as Mark Bilski and Melanie Clish acted as directed by Claimant or his wife.
b. The evidence was clear and uncontroverted that Mark Bilski and Melanie Clish acted with Claimant's consent or knowing acceptance that Claimant's wife was acting on his behalf
As of August 23, 2012, online FINRA disclosure documents for Bilski and Clish provide the following disclosures for the arbitration referenced in this "Street Sweeper" column and which apparently settled for $45,000 without any contribution from Bilski or Clish:
- THE CUSTOMER ALLEGES THAT THE FINANCIAL ADVISOR IMPROPERLY ACCEPTED AND USED DOCUMENTS WITH SIGNATURES THAT WERE NOT AUTHENTIC FROM MAY 2005 TO JULY 2005, IMPROPERLY FOLLOWED THE INSTRUCTIONS OF THE CUSTOMER'S SPOUSE WHO WAS NOT AN AUTHORIZED PERSON ON THE CUSTOMER'S ACCOUNT IN SEPTEMBER 2005 AND MADE MISREPRESENTATIONS AND OMISSIONS OF MATERIAL FACTS.
- CUSTOMER ALLEGES THAT REPRESENTATIVE PROCESSED WITHDRAWAL REQUESTS FROM HIS IRA WRONGLY ENDORSED BY HIS WIFE IN HIS NAME BETWEEN 2005 AND 2009.
Time and time again, these marital issues arise with often unanticipated results and troubling consequences to the servicing registered person. I have often compared these matters to the "Boiling Frog" theory, which posits that a frog placed immediately into a pot of boiling water will try to jump out. In contrast, if a frog is placed in room-temperature water, which is gradually heated to a boil, the relaxed frog will kick back, stretch out, and calmly allow itself to be boiled to death. By the time a stockbroker realizes that he or she is embroiled in a nasty dispute between a married couple, the damage is often done - and upon looking back, the warning signs suddenly look much clearer than when they first manifested themselves.
On the one hand, sure - without any doubt - registered persons should not accept account instructions from a spouse absent prior written authorization. Marriages don't last forever. Folks who outwardly seem happy may be preparing for combat a la divorce. You just never know - and that's the whole point of following sound compliance policies. As most Wall Street compliance and legal professionals tell registered persons, many of the seemingly idiotic rules are there for your protection.
On the other hand, in this case, the wife apparently was making withdrawals from her husband's account for a few months (or according to one online version of the facts for some four years!). I mean, c'mon, at what point is the husband charged with looking over his statements and account balances, asking what the hell is going on, and noticing that his wife has been forging his name?
Ultimately, this FINRA Arbitration Panel refused to buy whatever the Claimant was selling. Not only did this $1.1 million claim settle for far less than a tenth of the damages sought, but the Panel's commentary in support of the expungements is pretty much an exoneration of the accused registered persons. All of which sort of makes you wonder why neither Bilski or Clish counter-claimed for defamation and other damages based upon this seemingly frivolous case, at least as against them.
As I often note, the problems associated with dealing with spouses are often nuanced and not readily apparent to even the most skilled stockbroker. Nor is this a problem only found at indie and regional firms. To the contrary, it's a challenge faced by brokers at Merrill Lynch, Morgan Stanley, Wells Fargo, JP Morgan, as well as smaller firms. Not realizing that the room-temperature water is beginning to dangerously bubble around you is a common danger for many registered persons, as shown here.
For additional cases involving marital problems and their impact upon registered persons and their firms, read these "Street Sweeper" columns:
Husband Ordered 28 Withdrawals From Wife And Daughter's Accounts And Broker Gets In Trouble (July 19, 2012)
- Husband made 28 withdrawals from wife's and daughter's accounts with checks were issued to the wife and sent to her address of record.
Stockbroker's Friend, Cousin, And Ex-Wife Collide Into One Regulatory Mess (June 6, 2012)
- A broker borrows money from a friend to buy-out his ex-wife's share of their home
Crumbling Marriage Collapses On Citigroup In Dispute Over Wife's Withdrawals (June 5, 2012)
- A customer alleges that his ex-wife gutted his brokerage account and blames the broker and firm
Notary Duped Into Signing Off On Insurance Loans Fined And Suspended By FINRA (June 1, 2012)
- A Merrill, Lynch, Pierce, Fenner & Smith, Inc. registered person gets duped into notarizing a husband's and wife's signatures on a life insurance loan request.
Hubby Dips Into Wife's Retirement Account And She Successfully Sues Brokerage Firm (May 21, 2012)
- Brokerage firm sued for allowing customer's husband to make withdrawals
Mother And Daughter's Convenient Joint Account Leads to Odd Arbitration Win Against Wells Fargo (December 9, 2011)
- A quirky Decision that seems to suggest that a Joint Account between mother and daughter wasn't really a joint account but for the fact that it was - but, you know, not really.
Estate Sues Over Lawyer's Designation of Ex-Wife as IRA Beneficiary (May 17, 2011)
- A truly superb FINRA Arbitration Decision involving the issue of a divorced couple's IRA account at Capital One Investment Services LLC.