May 12, 2014
A pro se public customer takes on Wells Fargo and two registered persons in a FINRA arbitration involving the Great Recession and an investment philosophy. Add into that mix a whole session's worth of non-recorded testimony and this dispute takes on a somewhat volatile and contentious tone. In the end, however, there is a very impressive Arbitrator's rationale concerning a decision on whether to recommend expungement.
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in November 2012 and as amended, public customer Claimant Barr, appearing pro se, asserted misrepresentations, negligence and failure to supervise in connection with his allegations pertaining to Respondents' investment philosophy and purchases of equity funds in Claimant's account, including but not limited to, the Hartford Mutual Funds. Claimant sought $41,088.28 in compensatory damages plus interest, treble damages, and other relief. In the Matter of the FINRA Arbitration Between Joseph Barr, Claimant, vs. Wells Fargo Advisors, LLC, Michael Forester Absher, and Jennifer Lynn Oravsky, Respondents
(FINRA Arbitration 12-03850, May 1, 2014).
Respondents generally denied the allegations and asserted various affirmative defenses. Respondents also sought the expungement of this arbitration from the Central Registration Depository records ("CRD") of Respondents Absher and Oravsky.
Let's Get Moving
In a Motion for Judicial Notice filed in February 2013, Respondents requested that the Arbitrator take notice that Claimant Barr had rested his case-in-chief during evidentiary hearings on December 4, 2013, and that the hearings were postponed so that Claimant could retain counsel. In contradistinction to that assertion, Claimant denied having rested his case and asserted that he had made it clear during the December 4th hearing "that multiple issues needed to be researched and litigated in preparation for the next set of evidentiary hearing dates in April 2014."
In a Motion for Directed Verdict filed in February 2013, Respondents requested a directed verdict in their favor citing "Claimant's portrayal of Respondent Absher, as a good financial advisor, during the December 3 and 4, 2013, evidentiary hearings." Claimant opposed the motion and asserted that Respondents had "committed multiple discovery and evidentiary abuses and that they had distorted material evidence in asserting their Motion for Directed Verdict."
Around March 10, 2014, the Arbitrator issued an Order granting Respondents' Motion for Judicial Notice but denying their Motion for Directed Verdict.
Off The Record -- Really Off
Although the hearings resumed on April 15, 2014, it appears that the morning session was "inadvertenty not recorded," although the afternoon session and the next days' two sessions were recorded.
The sole FINRA Arbitrator hearing the case denied Claimant's claim in its entirety and recommended the expungements sought by Respondents Absher and Oravsky.
[C]laimant asserted that Respondents Absher and Oravsky's negligent misrepresentation caused him damages of more than $8,000.00 and money lost. Claimant claimed that Respondents Absher and Oravsky said they had a "plan for his money" when in fact they had no plan. Ultimately, Claimant sold his investments for more than $8,000.00 less than he had paid for them.
The pleadings and testimony of Respondents Absher and Oravsky and their expert witness during the recorded in-person evidentiary hearings conclusively proved Claimant's claims to be clearly erroneous. Here, the events transpired during a tumultuous downturn in the market. Most investors lost far more than the Claimant. Claimant had subscribed to a long-term buy and hold strategy, which Respondents Absher and Oravsky specialized in overseeing. Claimant's money was moved into funds from the same family he had been previously invested in. This was done with several purchases over the course of two months. Unfortunately, shortly thereafter, the market suffered its greatest decline since the Great Depression. Nevertheless, Claimant received significant protection from having nearly 40% of his account in cash. Claimant's $8,000.00 loss was of his own making. It was Claimant's decision to exit the market at the time that he was losing money instead of adhering to the long-term goals he originally agreed to. Had Claimant kept the investments which were, in fact, very suitable for his objectives, he would have made all of his money back and significantly more.
Thus, there was no negligent misrepresentation. Claimant's losses arose from his own actions, not from any misrepresentation or action by Respondents Absher and Oravsky. Because the claims are clearly erroneous, expungement for Respondents Absher and Oravsky is appropriate. The testimony from Respondents and expert witnesses showed clearly that Claimant's claims were erroneous. The investments were suitable. There was no negligent misrepresentation. Claimant's losses did not proximately result from any action or lack thereof by Respondents Absher and Oravsky. . .
Bill Singer's Comment
An interesting decision on a few levels. For starters, the participation of a self-represented party -- be that a public customer or industry person -- often plays havoc with the smooth progress of an arbitration. We get a sense of that when reading about the motion practice. In one instance, it is possible that the lack of formal legal training may have resulted in the pro se Claimant leaving an unclear impression as to whether he had or had not rested his case. In another instance, we have the assertion that the pro se Claimant may have compromised his case against the individual registered representatives by purportedly depicting them as "good." How much of this is a lawyer fairly taking advantage of a layperson, and how much of this is a layperson fumbling around, we do not know -- and, frankly, for all we know, Claimant Barr may well have been a lawyer or had legal training and opted to represent himself.
Separately, compliments to this sole FINRA Arbitrator for a compelling and articulate rationale concerning the recommendation of expungement. Notably, the Arbitrator reminds us of the all-important context: That the alleged losses were sustained during "a tumultuous downturn in the market. . . . shortly thereafter, the market suffered its greatest decline since the Great Depression." Building upon that theme, the Arbitrator concluded that "Claimant's $8,000.00 loss was of his own making. It was Claimant's decision to exit the market at the time that he was losing money instead of adhering to the long-term goals he originally agreed to. Had Claimant kept the investments which were, in fact, very suitable for his objectives, he would have made all of his money back and significantly more."