Sometimes you need to read the scorecard just to figure out who's playing

In a Financial Industry Regulatory Authority (“FINRA”) Arbitration Statement of Claim filed in December 2011, Claimant Lori Strayn alleged that that without her knowledge or consent, Respondents Wells Fargo and Snyder permitted her ex-husband, Robert Kevin Strayn, to transfer funds from certain Wells Fargo accounts into several E*Trade accounts. Claimants asserted various causes of action including negligence, conversion, breach of contract, breach of fiduciary duty, and constructive fraud. Claimants sought $138,700 in compensatory damages, punitive damages, interest, attorneys’ fees, and costs.

SIDE BAR:  You got all of that?  We got the wife. We got the ex-husband. We got two — count ‘em — two brokerage firms. And that ain’t all of it!  Before you stand for the National Anthem, here’s the scorecard. And just a head’s up: We got a number of scratched starters, some rookies, and a whole batch of guys playing out of position.

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In the Matter of the FINRA Arbitration Between:

Claimants: Lori A. Strayn, Individually and On Behalf of the Payton Ashleigh Strayn U/NV/UTMA Account

vs.

Respondents: Wells Fargo Advisors, LLC; E*Trade Securities LLC; and Agent Fred Snyder

and

Cross-Claimant/Cross-Respondent: E*Trade Securities LLC

vs.

Cross-Respondent/ Cross-Claimant: Wells Fargo Advisors, LLC

and

Third-Party Claimants: E*Trade Securities LLC and Wells Fargo Advisors, LLC

vs.

Third-Party Respondent: Robert Kevin Strayn

(FINRA Arbitration 11-04556, March 12, 2013).

Klaatu Barada Nikto?: What’s that “U/NV/UTMA” thing, you ask?  That’s Wall Street shorthand on the old scorecard. In this case, it stands for “Under Nevada‘s Uniform Act for Transfer to Minors Act.”  Wow, you learn a lot of stuff on “Street Sweeper” and it’s all for free!  Sorry — it had nothing to do with Klaatu or Gort or Earth’s destruction. Hey, go look it up.

Respondents E*Trade, Wells Fargo, and Snyder generally denied the allegations and asserted various affirmative defenses.

Getting Cross

In its Cross Claim, E*Trade Securities LLC, asserted that Wells Fargo was negligent when it failed to contact the Claimants to verify the bona fides of the ex-husband’s request to transfer assets to E*Trade.  Accordingly, since Wells Fargo was in the best position to have nipped this mess in the bud, that firm should be held accountable for any amounts E*Trade might be compelled to pay in excess of its apportioned degree of fault.

In its Cross Claim, Wells Fargo Advisors, LLC asserted that it was E*Trade’s obligation to ensure the truthfulness, accuracy, and legitimacy of  the Automated Customer Account Transfer Form(“ACAT”)  submitted to Wells Fargo. In light of E*Trade’s alleged negligence, breach of contract, and/or fiduciary duty, Wells Fargo asserted that E*Trade and Robert Strayn were wholly or partially liable.

Three’s Company

On First Base we got the original Statement of Claim. On Second Base we got the Answers. At Shortstop we got the Cross Claims. And now, playing Third Base, we got the Third-Party Claims.

In its Third-Party Claim, E*Trade Securities LLC asserted that Robert Strayn knowingly and fraudulently transferred assets, liquidated positions, and withdrew account funds.  In light of Robert Strayn’s alleged misconduct, E*Trade asks that he be held accountable for any amounts E*Trade might be compelled to pay in excess of its apportioned degree of fault.

In their Third-Party Claim, Wells Fargo and Snyder asserted that Robert Strayn withdrew/transferred funds without authorization and had wrongfully and fraudulently forged his ex-wife’s signature on the ACAT. In light of Robert Stayn’s alleged misconduct, Wells Fargo and Snyder If Wells Fargo or Snyder ask that he be accountable and found wholly liable (or partially liable along with E*Trade).

Scratched From The Lineup

Robert Kevin Strayn did not appear at the hearing.  Maybe he had a groin injury or Gort vaporized him — all of which is mere speculation, but, you know, I wouldn’t exactly consider his absence a huge surprise.

Final Score

The FINRA Arbitration Panel found Wells Fargo and E*Trade liable and ordered the firms to pay to Claimant Strayn:

• Wells Fargo Advisors, LLC: $50,253.60 in compensatory damages; $7,176.60 in interest; $13, 500 in attorneys’ fees; and
• E*Trade Securities LLC: $33,502.40 in compensatory damages; $4,784.40 in interest; $9,000 in attorneys’ fees.

Bill Singer's Comment

As intricate and perplexing as the caption in this case was and given all the finger pointing back and forth by those charged with wrongdoing, it came as no surprise that the FINRA Arbitration Panel ruled in Claimants’ favor.  Talk to enough veteran industry lawyers such as me and you will learn that rarely does anything good come from two broker-dealer respondents claiming that the whole mess was largely or wholly the other firm’s fault.  What arbitrators hearing such cases tend to conclude is that a number of folks may have been guilty but the one thing for sure is that it wasn’t the Claimant customer.

When you have multiple industry respondents and their strategy is to blame the other guy, it’s usually best for the respondents to meet somewhere quietly, hash out who’s going to offer what percentage of a settlement, and get the dispute resolved quietly — before there’s a published decision and before some journalist or blogger publishes a story about the calamity.  Of course, if Wall Street was predisposed to handling its miscues sensibly we wouldn’t be reading about the Big Whale in today’s news or about the almost-daily tales of cover-ups, failed disclosure, and arbitration outcomes such as Strayn.

For additional cases involving spousal issues, READ:

Till Death Do Us Part Stumps Stockbroker

• A registered person wrongly instructed the wife to sign a wire transfer form on behalf of her deceased husband; and, further, after the wife died,  wrongly added the date, wiring instructions and distribution instructions to the wire transfer form and submitted it for processing.

Husband’s Unauthorized Withdrawals Land Stockbroker In Hot Water

• A registered person never obtained a Letter of Authorization or a Power of Attorney from the wife that would have authorized her husband to issue account instructions.

Husband Sues Advest, Credit Suisse, And Two Stockbrokers Over Wife’s Unauthorized Withdrawals

• Customer alleged that broker improperly accepted his wife’s instructions and wrongly processed her requests for withdrawals from his IRA.

Stockbroker Victimized By Husband’s Withdrawals From Wife’s and Child’s Accounts

• At no time had the registered person obtained from the wife a Letter of Authorization or a Power of Attorney permitting her husband to issue instructions for her or her daughter’s accounts.

Stockbroker’s Friend, Cousin, And Ex-Wife Collide Into One Regulatory Mess

• 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

• 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

• 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

• 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

• 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

• A truly superb FINRA Arbitration Decision involving the issue of a divorced couple’s IRA account at Capital One Investment Services LLC.

Wife Defrauded By Husband’s Forgeries Sues Citibank

• Claimant customer alleged that she had been defrauded by her husband over the years by him forging her signature to effect transfers of money; however, there was no allegation that the Respondent stockbroker had assisted or was aware of the alleged fraud.

Spousal Cases: Till Death Do Us Part?

• Claimant customer alleged that her stockbroker sold off every position in her account without her direction, consent, or acquiescence; and then transferred the proceeds to her estranged husband.