Auction Rate Securities are the unwanted gift that keeps on giving. In today's BrokeAndBroker.com Blog, we report about yet another bit of collateral damage in which a lowly associate gets caught up in the litigation and regulatory meat grinder that has become the legacy of ARS. It ends well for the Claimant but he certainly got pounded and chopped up in the process of gaining his expungement -- which will still require a further confirmation by the courts.
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 2013, Claimant Dabit sought expungement of a customer complaint filed in April 2008 from his Central Registration Depository record ("CRD") and $50 in compensatory damages for his FINRA filing fees. In the Matter of the FINRA Arbitration Between Amin N. Dabit, Claimant, vs. UBS Financial Services Inc., Respondent (FINRA Arbitration 13-03081, April 1, 2014).
Going Through The Motions
In February 2014, the parties agreed to a telephonic evidentiary hearing. Respondent UBS did not oppose the relief sought and did not appear at the hearing.
The underlying issue in the customer arbitration involved Auction Rate Securities ("ARS"), and although the customer's complaint resulted in a settlement with UBS, Claimant Dabit was not a party to the settlement and did not contribute to it.
The sole FINRA Arbitrator recommended expungement and offered the following rationale:
[T]he complaint arose out of the sale of an auction rate security (ARS) that was made prior to the widespread illiquidity in the ARS market that occurred in February 2008. . .
[C]laimant did not participate in any of the alleged sales practice violations mentioned in the complaint letter. He had acted under a broker as a Client Services Associate. During this time he had no sales responsibilities relative to the alleged sales practice violations noted in the complaint letter.
A settlement was reached between Respondent and several regulatory bodies relating to the breakdown of liquidity of the Auction Rate Securities. This settlement had nothing to do with Claimant's activities while employed at UBS Financial Services Inc. Claimant was neither asked to nor did he participate in any of the settlement. . .