Blog by Bill Singer WEEK IN REVIEW

July 11, 2015

If you ever visit Manhattan and travel to the New York State Supreme Court building, you will see the following words emblazoned atop the building: "The True Administration of Justice Is the Firmest Pillar of Justice." That motto is often quoted by law professors, civil rights advocates, and others, and comes from a Sept. 28, 1789, letter from George Washington, who was seeking to convince Edmund Randolph to serve as the first Attorney General. The problem with the motto -- which is now literally carved in stone -- is that it's wrong. Washington didn't write "true;" he wrote "due."

Frankly, there is a great deal about the Law that sort of gets lost in translation and then, oddly, becomes carved in stone. When so-called blue collar folks engage in some forms of devious conduct, they often get charged with "willful fraud." When so-called white collar folks engage in similar forms of devious conduct, those acts often are characterized as "inadvertent error." Similarly, society demands that working stiffs repay their debts, but, at the same time, we engage in corporate bail-outs; and, on a far larger scale, debt-forgiveness or restructuring is granted to nations such as Greece.

Consider today's Blog about a registered person who deposited $3,200 of NSF checks over five days and was fined and suspended by FINRA for engaging in check kiting. Okay, sure, it sounds like she is guilty as charged and I do not excuse her conduct, but is this truly a Wall Street regulatory matter? And if your answer is "yes," how is that firm pillar of government holding up under the stress of similar misconduct by major financial institutions? READ

Within the world of Wall Street regulation, we encounter a registered spouse who is servicing the financial needs of the other spouse. As the Blog has reported over the years, within the so-called sanctity of marriage, a lot of nasty crap goes on. Ah, now there's a newsflash! In some regulatory matters involving spouses, it is quite clear that the underlying issue is one of miscommunication and misunderstanding; in other matters, however, it's simply about lying and thieving. A recent FINRA regulatory settlement demonstrates how the act of signing a loan application by a registered spouse explodes into a potential career-ending disaster. READ

First United Airlines went down in the early morning. Then, sometime around 11:30 a.m., the New York Stock Exchange announced it had stopped trading because of internal trading issues. Veteran Wall Street lawyer Bill Singer was seen racing to the NYSE in a taxi and heard repeating some words to a female passenger. Singer insisted that only those words would prevent the world's stock exchanges and airlines from freezing amid an alien cyberattack. Only time will tell whether Singer's efforts will save the world from doom. See LIVE FOOTAGE

Some Wall Street regulatory complaints name multiple individuals and entities as respondents amid multiple causes of action (not all of which include each named party). If you're a regulator, your purpose in casting a broad net is to cover all the bases. Some of the charges may be coin tosses; however, a regulator's job is to protect the public and find justice for defrauded investors. In some cases, the best that you can accomplish in a complaint is to narrow it all down to a likely handful of malefactors because you're not 100% certain as to who did what.

Notwithstanding the regulators' rationale, some respondents in shotgun complaints feel like they've been unfairly lumped in with a bunch of really, really bad guys.  All of which fosters the impressions that the purpose of corralling so many folks and charges under one litigation caption is to force the small fry to settle. In the end, those on the receiving end of this tactic feel like they're being sandbagged and unfairly pressured.

I've been on both sides of the shotgun pleading as a regulator and a defense lawyer. Normally, the regulator has all the power and leverage, and many respondents cave in under the pressure.  It's expensive to hire a lawyer. It's risky to take on a regulator. Sometimes the sound business decision is to negotiate the best settlement that you can -- even if you're convinced that you did nothing wrong and that you're being railroaded by over-zealous regulators. Every so often, however, a principled respondent won't settle, invites the regulator to bring it on, and intends to go down fighting after a hearing and whatever number of appeals are available. 

In a recent FINRA regulatory case, the regulator learned that an immovable force of an industry trader froze the unstoppable regulatory juggernut in its tracks. READ

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In my opening remarks in "Check Kiting Hypocrisy Flies High At FINRA" ( Blog, May 23, 2014), I questioned why the self-regulatory organization seems so quick to act when an employee of a member firm engages in check kiting or business expense fraud. Pointedly, I asked "how come there seems to be a double standard when the same type of conduct involves the employer firms?" In today's Blog, we consider the odd FINRA arbitration involving a former employee seeking payment of two months' commissions, which even the employer concedes was earned. Veteran industry lawyer Bill Singer raises some provocative questions about FINRA's role in this recent intra-industry dispute. READ

Ah, yes . . . Germany, France, Spain, Italy, Greece . . . Europe is in turmoil . . . the world awaits news.  Hmmm, where have we heard that before?  Oh well, another Monday and another week and, gee, who knows what those Old World geniuses will cook up for us this time.  All of which reminds me of that apt observation on European finance by famed 20th Century economist Oliver Hardy. READ